Council Tax and Revenue Support Grant

Lee Rowley Excerpts

Tuesday 31st January 2023 Westminster Hall

[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Lee Rowley)]

It is a pleasure to serve under your chairmanship, Sir Mark. I am grateful for the opportunity to respond to the debate. My hon. Friend the Member for West Dorset (Chris Loder) is an extremely vocal and proud champion of his local area in West Dorset. We have already spoken about this issue on a number of occasions in the short time I have been in post. He strongly advocates for his constituency’s position and the importance of rural Britain being heard in debates such as this one. I congratulate him on securing the debate and highlighting important points, even though there was a gap in the middle for other reasons.

This is an important issue, and I accept that. My hon. Friend has outlined some of the points that affect his constituency and the supporting unitary authority. It is important we discuss these issues fairly regularly. There will never be a perfect methodology, and there will never be a single answer for everything. There will always be these necessary discussions, but it is important—I say this as someone who represents a semi-rural area as well—that the voice of rural Britain is heard. He has made that voice heard loud and clear today.

In response to my hon. Friend, I want to talk briefly about the broader situation and then answer a number of the points he raised to the best of my ability in the time we have. His point is both broad and narrow. It is broad in that people should have confidence that the system works for all parts of Britain, broad in that we want a local government settlement that reflects need, and broad in ensuring that all parts of our country get the resources we are able to offer. In the usual way, there is a challenge around the allocation of resources in a system that has infinite and worthy demands on it, but very finite resources to support it.

My hon. Friend also makes a more specific and narrow point about the RSG. He has highlighted how that has changed for a number of areas across the country over a number of years. He has highlighted that Dorset has had, for a number of years, a zero or negligible grant. It has gone up slightly this year.

[Sir Mark Hendrick (in the Chair)]

Order. First, I give permission for Members to remove their jackets if they wish. Secondly, I ask the Minister to address his points through the Chair, rather than with his back to the Chair.

[Lee Rowley]

I will do that, Sir Mark. The RSG has been in place since the late 1980s. It has been a feature of the financial and settlement landscapes for a number of years. But, as my hon. Friend the Member for West Dorset has indicated, the utility of the RSG and the way in which it is applied to individual areas, such as Dorset and elsewhere, has changed over recent years. That is to be expected as the local government funding landscape changes over a 20 or 30-year period.

That plays out within the context of a broader settlement, and in order to have these kinds of conversations we have to acknowledge what is within that broader settlement—not just the RSG but all the other grants, and the overall envelope within which it is offered. While I absolutely accept that there are a significant set of challenges at the moment, I hope the sector has recognised—in my experience from speaking with the sector, from unitary councils and districts to county and metropolitan boroughs, it has done—that a significant amount of money has gone into it. While there is still a challenge with inflation, it looks like £60 billion-worth of taxpayer subsidy, in one shape or form, in England will be allocated in the provisional local government finance settlement that was announced for consultation before Christmas. We will make decisions and finalise that for the sector shortly.

That figure represents a significant increase across all councils. We have also provided additional clarity about what is likely to come in the financial year 2024-25, which has been a long-standing request of the sector, irrespective of the way in which it funds its individual services. That has been welcomed by the sector, and I hope we can build on it in future years, once we are through the current spending review period.

Although it has tended to be more relevant for non-unitary councils than unitary councils, we have also given a one-off funding guarantee that meant the provisional settlement contained a floor that ensured that individual councils were able to obtain some uplift prior to deciding what they wished to do or not do about council tax. The hon. Member for Strangford (Jim Shannon) is no longer in his place, but he raised an important point about his concerns regarding local government finance. I hope that with the provisional settlement and the clarity that we will provide shortly with the financial settlement, we have demonstrated our willingness to respond where we are able.

That is all within an extremely challenging global financial context, which we all know about, even if those on either side of the House disagree in part on the reasons for it. That is all down to challenges that were discussed at the Budget and that have been visible for a number of years—both within the immediate post-covid era and stretching back longer—across many western democracies as debt has risen, as the recovery from the global financial crisis has been attempted and as we seek to accommodate spending decisions that were made a number of years or decades ago, which still have overhang even now. We have to contextualise decisions about the financial settlement as a whole, which will hopefully be finalised soon, and how it is distributed within the very challenging financial context.

My hon. Friend the Member for West Dorset talked powerfully about the particular pressures on children’s services and adult social care, and he is absolutely right to highlight that there have been significantly increasing challenges around both those areas in the last decade or so. That is not unique to Dorset, but is absolutely the case in all other councils, as the hon. Member for Luton North (Sarah Owen) highlighted from the Opposition Front Bench when she spoke of her own experiences of adult social care.

That has been recognised in the last number of years of the financial settlement with the creation of, and then increased funding for, grants earmarked for adult social care and children’s care, including the social care grant. Over recent weeks, we have seen an additional amount made available for adult social care through the discharge fund, of which at least a portion will go through local authorities to support additional social care provision within individual localities, to help the NHS get through the winter challenges. My hon. Friend will probably also be aware of the market sustainability and improvement fund, which is due to come in in the next financial year. So there has been a response to the increasing pressures, and one that reflects greater linearity between grants that are provided by the centre and the challenges and pressures that individual authorities are facing. I hope that that further additional context is helpful.

My hon. Friend talked powerfully and at length about the specific aspects of rural funding. He made a strong point, and I will absolutely consider it more. As he will be aware, councils that have a significant proportion of rurality have already received additional funds through the rural services grant over the last few years. As part of the provisional settlement, we confirmed that that will continue in the coming years. I know that there is a debate about the quantum of that grant, but we have sought to do that. Within the funding formulas for other grants, there is a recognition of need, irrespective of rurality. As my hon. Friend rightly indicated, need is not necessarily related only to urban areas, but is also present in rural areas. I hope that, at least in part, the overall funding settlement is able to reflect that.

I want to talk about three points that my hon. Friend raised—I am not sure he will fully agree with me, but I want to touch on each of them. He made a number of points about the difference, both perceived and actual, between how different parts of the country and different authorities allocate their resources, and about the different funding that comes to different parts of the country, both in terms of what is provided centrally and what is raised. He highlighted a differential between London and other parts of the country, and that is returned to regularly. As somebody who was a councillor in London for eight years and who is now happily back home in Derbyshire as a Member of Parliament, I have seen both sides of the equation. As I say, nothing in life is perfect—no methodology is perfect, and no funding formulas are perfect. However, if there were an equivalent number of Members of Parliament here from urban areas—I know this because I used to be part of this conversation—they too would make a strong case that there are challenges, issues and problems in their areas that need attention. That is not to take anything away from my hon. Friend’s point about comparison, but it offers some context.

There are different pressures in urban and rural areas, in different geographical areas and in areas with different demographics. Ultimately, different choices are made. I have served in councils where there are significant choices around how social care is approached and where different choices are made around how leisure services and library services are approached. If we accept the principle of devolution—I know that my hon. Friend was not making this point per se—we also have to accept that there will be differences in the choices that are made, while recognising that some of those choices are down to the ability to determine things locally and some are more influenced by the overall process and decisions made elsewhere.

[Chris Loder]

I appreciate that, between the Minister’s constituency and mine, there is an £800 difference in council tax at a band D level, so the issues that my constituents face are very much as he is kindly outlining. However, even if we take away the urban areas, which I used as a comparator, there is a level of disparity—his constituency and mine are not totally dissimilar, but there is a clear disparity. We welcome many people to retire in West Dorset, and indeed across the whole county and the whole south-west. That means that local councils often have to bear much greater financial responsibility for social care, but that is not reflected in the financial machinery we have today. From what the Minister said, and from my understanding of the process, there is not really a way to take that into account. Are the Government doing anything to give us some hope that we will have a better machinery in due course to take it into account?

[Lee Rowley]

I am grateful to my hon. Friend for his question. I accept that the existing settlement is a complex landscape with multiple different grants, interventions and interactions. At the core of those grants, there is a set of need assessments, need calculations and funding formulas. Some of those funding formulas are a number of years old, some are more than a number of years old, some are more recent and some approach things in different ways from others, so I accept that there is a complex landscape. Local government finance has always been a complicated and challenging landscape, but there is, at the core, a set of needs assessments. There is always a question about whether they could be updated and changed and whether they could better reflect how things are working and what is happening in individual localities, but needs assessment is at the heart of local government finance. As I indicated, there has also been a move over the last few years to a greater set of earmarked grants, specifically around adult social care, and they are intended to reflect need to the extent that is possible.

To respond to the second of the points from my hon. Friend’s speech, there is then a set of different circumstances in each individual area, in terms of both spend—lots of demand on adult social care in one place, but slightly less in others, and lots of demand on children’s services in some places, but less in others, depending on the geography—and the funding available. That is because of a complicated web of where councils started from; decisions that have often been made over many decades; the corporate approach that successive councils and their leadership have made; and reflections of need—however perfect or imperfect they may be. Can I say that that process is perfect? Absolutely not. Can I say that there will not be anomalies or challenges in it? No, because there absolutely will be.

My hon. Friend mentioned his concerns about areas with older demographics and the pressures that that puts on them. He makes a cogent case that rural areas, parts of which are more affluent, although they still contain areas of deprivation, are highly dependent on council tax. However, if there were urban MPs here—he compared his area to at least one such location—they would argue that their areas receive significant revenue from business rates, and Government are removing an element of that and distributing it elsewhere, including to places that are not urban. It is a very difficult, complex set of interactions. I absolutely accept that it is not perfect and that we need to continually look at it, but it seeks to reflect need, notwithstanding the complicated process by which it has got there.

On my hon. Friend’s point about whether there are opportunities to review the situation, there is always a need to look at these kinds of landscapes, particularly given the complexity and the fact that some elements of them have been around for a number of years. He will be aware—we have spoken about this previously—of some of the things that were started in recent years, such as the fair funding review.

On the financial settlement this year—I am not taking anything away from my hon. Friend’s point about the need to review these areas—having come through three years of significant difficulty in everybody’s lives, but particularly in the local government sector, we had to choose whether to make significant changes or offer stability. Through the provisional settlement, we have tried to offer a platform for stability, with significant additional funding, so that local authorities in the coming financial year—2023-34—have some breathing space after the tremendous work they have done post covid and during the inflationary period, which we hope has now peaked or will shortly peak. That will give them the opportunity to plan, think and look at how they can reform and do things differently to get ready for the years ahead.

We will always look at opportunities for review and change. Before Christmas, the Secretary of State indicated to the Levelling Up, Housing and Communities Committee that he wanted to do that, and I am doing it as a new Minister. We are looking at what can and cannot be done in individual areas. I welcome the comments and thoughts of my hon. Friend and the hon. Member for Luton North about those kinds of changes, and we will look that in the coming months and years.

I want to make a small plea to my hon. Friend to see things in the round. Although I accept that it is important to zero in on areas of contention and problematic areas, councils should have a significant absolute-terms increase in revenue in the coming financial settlement, and there have also been significant grants, particularly on the capital side. I do not want to tell my hon. Friend things he already knows, but I want to read this into the record: there has been significant funding on both the revenue and the capital sides to Dorset in recent months through the community renewal fund and the UK shared prosperity fund, and I believe that an area near his constituency was successful in a levelling-up bid just a few weeks ago. None of that takes away from his points, but it is important to see the context in which this discussion is taking place.

I absolutely accept that these are challenging times, that no methodology is perfect and that there is a legitimate debate to be had about how local government finance supports all parts of our country, all demographics and all facets and characteristics, including rurality and other things that my hon. Friend outlined. I hope that, in acknowledging all that, we can also collectively recognise that there has been a significant increase in funding this year, which is likely to go to all areas, as outlined in the provisional settlement. I hope my hon. Friend accepts that the prioritisation of stability in this coming year is important, given the challenges we have gone through in recent years. I look forward to working with all Members, including my hon. Friend, to see what changes and improvements are possible in the coming months and years.