Local Government Finance (England)
Debate between Lord Beamish and Andrew Gwynne(4 years, 9 months ago)
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Andrew Gwynne (Denton and Reddish) (Lab)
First, I want to thank our dedicated council staff, officers and our local councillors of all political persuasions and none, who over the past decade have had to contend with year-on-year budget cuts and a Government who have failed to take any meaningful action on the largest issues they face—the crises in children’s services and in adult social care. Yet our councils have ploughed on, and they have continued to innovate. They continue to provide good services for many of our local communities, because councils are the linchpin of our communities. They ensure the delivery of proper, cohesive, joined-up services with other agencies—whether housing associations, the police, leisure services or youth services—but it is crucial that our councils and our councillors are given the resources that they need, and that we do not cost-shunt from one area of the public sector to another.
As the Secretary of State will know, the finance settlement is one of the most important events in the local government calendar, so it was disappointing that the settlement this year was subject to delay and a degree of uncertainty because of the general election. It was also disappointing that the Secretary of State did not deliver the provisional settlement by way of the usual oral statement before Christmas, especially considering the cancellation of Housing, Communities and Local Government questions for almost six months.
It is at least pleasing to see the Secretary of State in his place today, after he survived the reshuffle before the recess we have just returned from. Reshuffles can be a tough business—a sigh of relief from the two survivors on the Front Bench facing me, but brutal for those who are moved or dropped. Who knows what will happen after 4 April on this side of the House, so in the spirit of solidarity, I want to pay tribute to the right hon. Member for Tatton (Esther McVey), the former Housing Minister, for all that she did in pushing for greater investment in social housing, in particular. I would also like to thank the right hon. Member for Rossendale and Darwen (Jake Berry), the former Northern Powerhouse Minister. We certainly had a fair few run-ins over the years, but I never doubted his commitment to the job of representing a rejuvenated north of England in Government, and I would like to thank him for his work. I sincerely welcome the new team on the Government Front Bench, as I did earlier today before Housing, Communities and Local Government questions.
I am happy to recognise a local government finance settlement today that at last begins to move in the right direction and provides an overall uplift in spending power. This is an uplift, though, with some big provisos and assumptions. It must be considered in the overall context. Councils are at a low base after 10 years of reductions and cuts, and local authorities still face very significant pressures that this settlement does not address nearly enough.
Today the Secretary of State has offered what the Local Government Association has referred to as the “least worst” financial settlement since 2010. To be honest, after a decade of disappointment, it is easily done. In the past decade, funding for local government has fallen by 43%; since 2015 alone, it has fallen by 32%; and if we look at the Government’s preferred measurement, and include today’s settlement in full, we see that overall spending power is still 11% lower than it was in 2010. That is 11% less funding for our local public services, while residents continue to pay more every year for council tax and services are being cut. [Interruption.] The Secretary of State says it is a reduction; if council tax goes up every year, it is not a reduction for those people. Let me just say to him that the average band D council tax in England in 2010 was £1,439, in 2015 it was £1,484, in 2019-20 it was £1,750, and it is going up again this year too; those are increases in council tax however he tries to spin it.
We know that the cuts have not fallen equally across England. Labour-run authorities have seen their spending power fall on average by 14%, almost twice on average as much as the cuts forced on Tory-run authorities. I do not say that this is all political; it is a fact of geography, because areas like these are also often some of the more deprived areas that have the greatest needs in adult social care and children’s services, that have the greatest health inequalities, and that are more grant-dependent to fund services, because the property types in those areas mean that their council tax base is low, and that cannot be changed quickly or easily. But the difference between the figures for funding and spending power is also revealing, because it shows how much the Government have pushed the burden for funding local services away from the centre and on to local taxpayers.
In an ideal world of localism that is not a bad thing, but the playing field is not level and nor is the game currently fair. We are now in the bizarre situation where people are paying more for less, and that is unsustainable for the long-term viability of the local government sector, something I cherish, having been a councillor for 12 years before entering this House.
In order to achieve the Community Secretary’s stated 4.4% increase in spending power, residents will once again be forced to bear the burden of inflation-busting council tax increases. The Government’s plans are entirely predicated on this increase happening in every town and county hall—and that in itself is not a certainty—and so the “best settlement in a decade” boast from the Secretary of State depends on this happening, or the 4.4% that he quotes will not be reached.
Mr Kevan Jones
Not only do we have a system that has been deliberately skewed to benefit certain parts of the country, but there are added pressures on certain councils, such as Durham and other northern councils, in terms of social care and looked-after children. With social care, we have fewer self-funders, and there are over 900 looked-after children in Durham, which should be compared with the figures for some other areas. That means that 60% of the budget is now being spent in just those two areas, and in some places—such as Hartlepool, I think—it is about 65%.
Andrew Gwynne
My right hon. Friend is absolutely right, because the people-based services—children’s services and adult social care—are services that most of our constituents never have to use and where they do not see the money being spent, but the things that they care about and think these inflation-busting council tax increases are going towards, the neighbourhood services, are the things that over the past 10 years have been squeezed and squeezed, and in some cases have disappeared altogether.
Let us be clear: I do not expect churlishness or hypocrisy from Ministers or Members of the governing party in the upcoming local elections if councils increase their council tax and the social care levy by the maximum amount, because this finance settlement that we are agreeing tonight requires these increases to happen in full in every town and county hall in the country, to meet the 4.4% claim that is being made. What we know is that one third of this year’s growth would come directly from the general council tax increases of the maximum of 2.99%, with an additional one-fifth of the whole figure of growth coming from the social care levy being charged at the maximum of 2%. That is over 50% of the funding growth that has been lauded tonight coming from local taxation, not Government. As we know, its spread is very unequal, so we do not expect to see Ministers boasting about this settlement and then criticising councils for putting up council tax in the same breath. This settlement also fails to move beyond the sticking-plaster solutions that have been offered in recent years.
Solace’s local government finance spokesman, Martin Reeves, has criticised the Government’s approach, saying:
“the constraints placed on these pots usually means the money is spent on dealing with existing demand, demand that is itself often a symptom of structural (and often longstanding) funding shortfalls elsewhere in the system.”
Rather than this reactionary approach to funding, we need to be dealing with a system that is at breaking point, proactively investing in reforms to improve outcomes, particularly for the more vulnerable people in our communities. The National Audit Office has warned that a continuation could
“undermine strategic planning and create risks to value for money.”
I trust that the Secretary of State is working closely with the NAO on its review.
What I am speaking of today should not be any surprise to the Communities Secretary, because I am not the first person to raise concerns over the Government’s funding plans. Indeed, over one in 10 who responded to the Government’s consultation on the financial settlement objected to the way that the Government are increasingly using council tax to address the funding pressures the Government themselves have created, arguing that that would transfer the burden to local taxpayers. They argue, and they are right, that additional council tax flexibilities can have an uneven distributional effect, benefiting areas with larger tax bases while those with smaller tax bases continue to see gaps in their budgets grow.
Unfortunately, those same areas are often the ones that face the largest pressures on adult and children’s social care. For example, while Wigan has the potential to raise around £4.5 million from the council tax changes, Buckinghamshire can raise £12 million. For Wigan, that would barely let it break even on last year’s overspend as it managed increasing demand on care services, particularly caused by pressures in children’s services. Growth in demand is not slowing down, but the money to ensure that these essential services are in place is not coming from the Government and cannot be sufficiently raised in many parts of the country with the greatest call on these services.
A quarter of people who responded to the Government’s consultation were concerned, stating that the additional flexibility on council tax was not enough to meet the growing pressures on children’s services. One in five raised that concern in relation to adult social care. In 2018, the Local Government Association warned that the funding gap for adult social care alone will grow by £3.5 billion by 2025. Today it reported that over the past five years pressures on children’s services have pushed overspending to £3.2 billion. The number of children in care has grown by 28% in the past decade, and the number of children at risk of physical, emotional or sexual abuse or neglect has increased by 53%. I do not say that to make a political point. It should shame each and every one of us, on whichever side of the House we sit, that those most vulnerable children are being let down by a system that is broken.
The LGA has also warned that the funding promised in the finance settlement will not even be enough to cover the increase in costs from the rise in the national living wage from April. Even though demand continues to grow, councils will be forced to cut back on these services. This is not sustainable. I appreciate that there are no quick fixes. The Secretary of State knows my concern about the so-called fair funding review, but the figures that were used by the Local Government Association Labour Group were produced by the Tory-led LGA, whether he likes it or not. His Ministry was asked for clarification of whether or not those were in line with Government trends and thinking, and it gave its acknowledgement that they were.
I repeat my offer to the Secretary of State: we in the Opposition are willing to work with anyone who genuinely wants to fix our outdated and broken local government finance system, but it has to be genuinely fair and based on real needs. It needs to reflect the circumstances facing each local authority, including their ability to raise income, and it must properly take account of all kinds of need, including deprivation and health inequalities.
After a decade of decline and neglect, there is little surprise that the promise today of an uptick in spending power has largely been welcomed by the sector, and indeed, by us. We will not oppose the local government settlement. We will not oppose councils receiving any additional funding in today’s settlement, but let us be honest: this settlement, while welcome for a limited uplift, does not solve the financial crises faced by our town and county halls. It does not fix the two cost and demand-led services of adult and children’s social care, and it does not ease the squeeze on our hard-pressed neighbourhood services—all the things that our constituents think that their ever-increasing council tax bills go towards: the parks, the road repairs, the ground maintenance, community centres, street cleaning, libraries, street lighting and bins. There are also the contributions that are less tangible, such as the sense of place, community and local identity—the things that make us proud, or sometimes not proud, of where we live. All these things will continue to be cut or squeezed until or unless the funding crisis in children’s and adult social care is properly addressed and councils can start to rebuild our neighbourhood services again. Once we get to that place, that will be the time to welcome what is happening in local government. That will be the time to cheer. We will support the Secretary of State tonight, but let us get local government back to where it always should have been—at the heart of rebuilding our communities.
Local Government Finance
Debate between Lord Beamish and Andrew Gwynne(4 years, 10 months ago)
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Andrew Gwynne
My hon. Friend is absolutely right. I will touch on that report later in my speech, but it highlights the impact of 10 years of cuts to our local councils and public services at a time of rising demand, particularly for adult social care and children’s services—the expensive people-based services. Given that the councils with greatest social need and the worst health inequalities have a limited tax base to make up for any financial losses, the problem is that the so-called fair funding formula could be what tips them over the edge.
I know that the Minister for the Northern Powerhouse and Local Growth, the right hon. Member for Rossendale and Darwen (Jake Berry), will stand up and pronounce that the finance settlement that we are set to agree next Wednesday shows that he is investing in local services, but he is a lone voice in saying so. That shows just how detached the Government are from the sector that they are here supposedly to represent, because the truth is that since 2015—just five years—local government funding across England has fallen by 32%.
Mr Kevan Jones (North Durham) (Lab)
Does my hon. Friend agree that local government is also fearful of last week’s rumours that the Chancellor will ask Departments to cut another 5% from their budgets?
Andrew Gwynne
That is very worrying, and I hope the Ministry of Housing, Communities and Local Government will stand up against it. Those of us who have been a Member of this House for some time will remember that the former Secretary of State for Communities and Local Government, Lord Pickles, was only too keen to offer up the maximum cuts from his Department, meaning that local government in England was the part of the public sector that was clobbered the hardest.
It is even worse than the 32% fall over five years because, since the Conservative party entered government in 2010, funding for local councils has been slashed by more than half. We have all seen the consequences of that neglect: the unrepaired roads, the uncollected bins, the cuts to adult learning and the closed children’s centres. Under Conservative leadership, almost a fifth of our libraries have been forced to close because of cuts to funding. One of the previous Labour Government’s greatest achievements, the Sure Start programme, has had its funding slashed in half, forcing as many as 1,000 Sure Start children’s centres to close since 2010.
Andrew Gwynne
As the hon. Gentleman states, the block grant is set by this place, so the Welsh Assembly Government have had to ensure that their spending meets the money granted by Westminster. I have been sent a budget briefing from the Welsh Government about their intentions not only to increase the adult social care budget in the year ahead, but to give a real-terms increase in local government spending. I welcome that overwhelmingly, because Welsh councils, like English councils, need good public services.
Mr Kevan Jones
Durham County Council has lost £224 million in core spending since 2010, and the Government’s direction of travel has been to move the expenditure on to the council tax precept. The problem for County Durham is that more than 50% of its properties are in band A so, irrespective of how much the council tax is put up, it will do nothing to plug the gap left by the reduction in core spending.
Andrew Gwynne
My right hon. Friend is right on that. Councils cannot change their council tax base overnight. If their properties are predominantly in bands A and B, that is the council tax base for that local area. Governments of all political persuasions over the years have always recognised that not every council has the same baseline and the same ability to bring in enough money for basic, decent statutory public services, which is why we had the rate support grant in the 1980s and the revenue support grant from the 1990s onwards. Those things were in recognition of the need for a redistribution of funding to areas that cannot generate enough funding from council tax and business rates alone.
Andrew Gwynne
I reiterate what I just said: it is for the Conservatives to come forward with their proposals. We will view those in the round with other ideas and see whether we can reach a consensus. I know that there are different views on both sides of the House about a system of insurance, but I am not personally in favour of that. I think that actually the easiest and quickest way to resolve the social care crisis in local government is to make sure that we fund social care through local government.
I want to come on to the issue that could make the situation that I have set out even worse for many of the same local authorities that are already at breaking point. The research from the Local Government Association has exposed the so-called fair funding review for what it really is: a cynical plan that risks leaving more sick and vulnerable people without the care they need. If implemented in the way that the LGA has calculated—and MHCLG apparently told the LGA that its assumptions were along the lines that the Ministry is going—then funding for social care for older people is due to drop in London, the west midlands, the north-east and the north-west, while the south-east and the south-west will see an increase in many areas. For young adults, the largest decreases will be seen in the north-west, the north-east, Yorkshire, the east midlands and west midlands, while the south-east and east of England will see some of the largest increases.
This research from the Tory-led LGA has shown that many of the areas that voted for, and put their trust in, the Conservatives for the first time in 2019—the so-called red wall seats—will see some of the largest cuts to social care funding if the plans go ahead in the way that has been outlined. Indeed, three quarters of those red wall constituencies—the seats that gave the Prime Minister his majority—will see millions of pounds of funding diverted from their hard-pressed councils to another part of the country. The LGA Labour group estimates that that is £300 million of funding that will be funnelled from less affluent councils to the more affluent communities.
But even worse than both those factors is the effect that there will be on the most deprived communities. The 10 most deprived local authorities in England will see, on average, a 13% cut, while the wealthiest communities in England will see their budgets grow by 13%. This model was devised back in 2014 at the height of coalition austerity; perhaps it was then politically expedient for the Conservatives to divert funds to leafy Tory shires at the expense of more deprived metropolitan and urban communities. But given that the Prime Minister’s claim that austerity is over, divvying up an ever-shrinking pot differently is so last Parliament—in fact, it is so the last two Parliaments before the last Parliament—and it is certainly no longer politically expedient.
Last week, I wrote a letter, with council leaders, to the red wall Members on the Government Benches, urging them to speak out against a plan that will see cuts to adult social care—one of the largest cost pressures facing all local councils, particularly those in deprived areas. I know from some of the responses that Government Members have given to the press that the calculations from the LGA have been dismissed as speculation. I say to those Members that this analysis was produced by the cross-party LGA and was released officially to support councils as they plan their budgets in the coming years. The analysis that the LGA produced was also informally shared with MHCLG, whose officials privately confirmed that the assumptions in the analysis are sound.
This new research is also consistent with what we already knew. Last year, researchers in Liverpool warned that removing deprivation from the funding formula would see the 20% most deprived areas lose £390 million a year. The Institute for Fiscal Studies has warned that removing deprivation from the formula would likely hit councils in inner London and most other urban areas, like Manchester, Birmingham, Newcastle, Bristol and Kingston upon Hull, where deprivation tends to be not just concentrated but over-concentrated. The IFS states that
“proposals by the government to base assessments of councils’ needs for spending on services like homelessness prevention, public transport, waste collection, libraries, and planning on population only would shift funding from councils serving deprived areas to those serving more affluent areas.”
It has also warned that the evidence base to justify this decision is weak.
Mr Jones
It is not just about social care. County Durham, under the formula that is proposed, is likely to lose £39 million in public health funding, whereas Surrey County Council will actually increase its budget by £14 million. I look forward to my new Conservative colleagues in County Durham arguing how that can be fair to County Durham.
Andrew Gwynne
My right hon. Friend is absolutely right. It is not just about social care, but the LGA has published the fair funding review calculations based on social care. It has also done the calculations for children’s services, for the foundation formula and for the public health grant. I would hazard a guess that they show exactly the same trends. He is absolutely right about County Durham, because the LGA’s analysis shows that the change in funding there since 2015 alone is already 29% down. The change in funding from the fair funding formula would equate to another 6.71% reduction—a £10,327,679 cut—for his constituency. Contrast that with Beaconsfield, for example, where there would be a 17.5% increase—nearly an extra £15 million of funding. That is not fair by any stretch of the imagination.
The issue is really straightforward for the Government. If they do not agree with the analysis, the response is simple: follow up on the promise made by the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Thornbury and Yate (Luke Hall), at the LGA conference in January and publish the exemplifications of the funding formula so that we can see exactly what the impact is. It really is that simple. If the LGA assumptions are now wrong, show us. Let councils, councillors and Members of this House see the exemplifications; we will then know how fair the fair funding review is to the different parts of England.
My worry is that what we know is just the thin end of the wedge. We know that the five least-deprived local authorities have, on average, seen their budgets grow—the least deprived local authority, Wokingham, saw its budget grow by 18%—but that has been gained at the expense of the most deprived. The top 5% most deprived local authorities face cuts of 22% on average. That is not fair. As I said at the start of my contribution, we know that those same local authorities do not have the same ability to raise income from council tax.
This is a scandal for those who claim to be one nation Conservatives. I genuinely believe that across all political parties not one of us stood for election to come to this place and introduce measures that will make life more difficult not just for the people we represent but for the poorest communities in this country. I like to give the benefit of the doubt even to Members from the Conservative party, so I hope that today Members from all parties will support our motion, or at the very least intensively and strenuously lobby Ministers and take a stand against what could cause misery for their constituents. This will be a major test of Conservative Members’ commitment to their constituents. I am sure that local people will not forgive or forget if they fail to stand up for those who put their trust in them at the election, knowing what we already know.
Finally, I say this to Ministers: be open, be transparent and publish the exemplifications. If they are anything like what the LGA, the LGIU and other local government experts fear, scrap the scheme and go back to the drawing board. A fair funding review that is genuinely fair will have our support.