Local Government Finance

Kevin Hollinrake Excerpts

Tuesday 5th February 2019 Commons Chamber

[James Brokenshire]

Obviously we will look at all the representations that continue to be made during the review of relative needs and resources, but our analysis in the review demonstrates that, overall, population is by far the most important cost driver for both the upper-tier and lower-tier foundation formulae. Although in aggregate terms deprivation is not shown to be a major cost driver for the services included in the foundation formulae, I am of the view that relative levels of deprivation remain an important cost driver for some specific service areas such as social care. I welcome views as part of the current consultation, and I am sure the Select Committee will continue to focus on this important work.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Can it be right that prior to the new fairer funding formula central Government grants for inner London were £437 per person per year, whereas the grants for county areas were £153 per person per year? Do we not simply need a fairer funding formula?

[James Brokenshire]

My hon. Friend makes the case clearly for undertaking this review and looking at this properly. We need to look at the starting point and take the approach he highlights to ensure that fair distribution can be made.

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[Andrew Gwynne]

My hon. Friend, who is a doughty champion of the people of the city of Coventry, is absolutely right. What we have seen today from this Secretary of State is smoke and mirrors. He can talk about a spending power increase across local government, but that is predicated on every English local authority increasing council tax by the maximum level possible—an eye-watering, inflation-busting increase. We know that not every local authority can raise sufficient money by council tax alone, which is the reason behind the revenue support grant. A 50% cut to the revenue support grant of my hon. Friend’s city of Coventry is a big cut by monetary standards. Coventry’s council tax base does not allow the city council to raise anything like enough money to plug that gap.

[Kevin Hollinrake]

The hon. Gentleman talks about the revenue support grant. How can it be right that a person in London gets £437 per year allocated to them from the central Government grant, a person in a metropolitan borough £319, and a person in a county £153? How can that be fair or right?

[Andrew Gwynne]

I will answer that: a third of the services are more expensive to deliver in urban areas. That is the fact. It is in the Government’s own report that was commissioned for the then Department for Communities and Local Government. Some Tories do not get the reality of this, but I imagine that those who represent urban areas probably—silently—do. The fact is that revenue support grant is there because Governments of all political persuasions recognise that not every area is the same. The baseline is not the same. In some urban areas, the council tax base is low.

[Kevin Hollinrake]

Will the hon. Gentleman give way?

[Andrew Gwynne]

No, I am answering the hon. Gentleman, if he will do me the courtesy of listening.

Every local area has a different council tax base. I hazard a guess—I do not have the facts in front of me —that a 1% increase in council tax for Tameside Council, which I partly represent, will raise significantly less than a 1% increase in his area’s council tax, but the needs of Tameside are as great, if not greater, than some of the needs of his constituents.

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[Andrew Gwynne]

My hon. Friend is absolutely right. I pay tribute to his council for all the hard work that it is doing in very difficult circumstances. Cuts do have consequences, and cuts that are outside the control of the local authority are now presenting themselves as spending problems for town and county halls across England. That is why we are so angry about what this Government are doing.

[Kevin Hollinrake]

rose—

[Bob Blackman (Harrow East) (Con)]

rose—

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[Mr Clive Betts (Sheffield South East) (Lab)]

I probably agree with most of the points about devolution made by the hon. Member for Carlisle (John Stevenson), but I strongly disagreed with his comments about the situation in 2010. It was clear that we had an international financial crisis, and Gordon Brown deserves a great deal of credit for mitigating its consequences on the international stage. That should be put firmly on record.

[Kevin Hollinrake]

The hon. Gentleman is right about the financial crisis, but does he agree that Labour balanced the books in only 10 of its 13 years in power and ran up a collective deficit of £440 billion?

[Mr Betts]

That is quite a good record. If the hon. Gentleman looks back, he will find that one of the problems was the lack of regulation of financial institutions, but the Conservatives criticised Labour for regulating too strongly throughout that period.

I will try to be charitable to the Government by saying that I can welcome some elements of the spending review, including an extra £650 million for social care. However, that has to be set against the LGA’s analysis of a £1 billion deficit in both children’s and adult social care, which will rise to £3 billion for each in 2025. I can welcome the fact that the spending power of councils as a whole will not fall in real terms—there is a 2.8% increase in cash terms—but that is spread differently across various authorities, and is cushioned by increases in council tax. Those increases bring in more money in richer areas, of course, and those are the areas that have received the smallest cuts to their grants since 2010. Those two things do not sit well together.

Sheffield has seen a 50% cut in grants since 2010 and major cuts to services. Social care services for both children and adults overspent by £15 million last year and will do so again this year. This is not a local authority out of financial control. It has not yet used its reserves, but next year, for the first time, it is planning to do so. Of course, that can be done for only a limited number of years. Many authorities across the political spectrum are in the same position.

Care is very important, but there are other services to consider. Sheffield and most authorities have done the right thing by concentrating on care, because they have statutory responsibilities to the elderly, children in care and people with disabilities, but National Audit Office figures for cuts to other services since 2010 show that private sector housing has been cut by 60%, that traffic management and road safety has been cut by 60%, that recreation and sport has been cut by 50%, that libraries have been cut by 30%, and that planning and development has been cut by 50%. Those cuts are hitting communities. In the end, it is not councils that are hit by such cuts; it is communities. It has happened in my city, where libraries are having to be staffed by volunteers, grass-cutting is done less often and private sector housing officers are not sufficient to bring selective licensing on the scale that we would like. There are cuts to funding for road safety, with bus routes scrapped, and children’s centres and youth centres closed. That is happening in the constituencies and local authorities of Conservative Members, too. What worries me is that as most people do not have family members in care, they see the other council services: parks, buses, libraries, road maintenance and refuse collection. Those are the services that matter to them, but they are the services that are subject to the biggest cuts of all.

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[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak in this debate, and I warmly welcome the Secretary of State’s remarks. This is of course the fourth year of a longer term framework for local government funding, and the key element is the need for a fairer funding formula. We also need to deal with some of the underlying pressures for local authorities, particularly the time bomb that is adult social care. An extra £10 billion of funding for adult social care to 2020, including £650 million committed by the 2018 Budget, will go a long way to help in the short term. In the longer term, we need the fairer funding formula underpinned by the business rates retention pilots. I am delighted to see that North Yorkshire County Council has been entrusted with one of those pilots.

The fairer funding review and the spending review that comes with it are vital. If fairer funding is simply a redistribution of money—moving money from one local authority to another—it will be difficult for some authorities. We must learn the lessons of the fairer funding review in education, and fairer funding must come with extra money in the pot generally, to make it possible for some local authorities to manage as we redress the balance and make things fairer.

The present situation is unfair. Nine out of the 10 best funded authorities per capita per year are in London; they have about £1,000 spending power per person a year. In North Yorkshire we have £770 per person a year, despite the fact that a much larger proportion of that £770 is made up of council tax. We are contributing more but getting less in services. As my hon. Friend the Member for Waveney (Peter Aldous) pointed out, central Government grants to local authorities to inner-London councils are £437 per person per year, for metropolitan boroughs they are £319, for unitaries they are £225 and for counties £153. The hon. Member for Denton and Reddish (Andrew Gwynne) cannot talk about unfairness and avoid those figures. We must move to a fairer funding settlement.

I pay tribute to my neighbour, the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Richmond (Yorks) (Rishi Sunak), who has looked at this issue and tried to simplify the system. Simplicity is the ultimate sophistication, as da Vinci said many years ago. My hon. Friend is right to try to simplify this and make it fairer. We must take on board many of the comments that have been made to make sure that the funding formula is fairer in the future.

Adult social care is putting more pressure on my constituency than any other issue and we need to take a more strategic approach to its funding. The Select Committees on Housing, Communities and Local Government and on Health and Social Care had a long joint inquiry on this and came up with a simple recommendation—to emulate the German system of social insurance, which involves a social care premium. It is a simple, scalable and sustainable solution. It is a small amount that everybody pays—everybody pays something so nobody has to pay everything. That is the key to it. It was introduced in Germany in 1995 to replace a system of local government funding, and it has been incredibly successful. It was a unanimous recommendation of those cross-party Select Committees.

The key element of the system is not the small amount people pay in, but how they get the money out. If someone is defined as in need of social care—a young adult or someone in later life—they can take it in the form of local authority provision, third-party provision or as a cash settlement every month which can be paid to a neighbour or loved one, be it daughter, son, nephew or whatever. It also helps to strengthen the social fabric by making sure that people are looked after by those who love them most and understand their needs the most. It is something that we should adopt, and I hope it will be in the Green Paper that is expected shortly.