Local Government Finance (England)

Liam Byrne Excerpts

Wednesday 10th February 2016 Commons Chamber

[Greg Clark]

There is a lively debate as to whether the bigger town and parish councils should be part of the capping regime. I have resisted drawing them into that, but I look to parish and town councils to exercise economy, recognising that the services that they provide are much valued but that they are paid for by council tax payers. If those councils continue to operate in an economical way, they may not give rise to the question on which my hon. Friend seeks certainty.

[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

Will the Secretary of State give way?

[Greg Clark]

I am going to make some progress, as you have urged me to do, Madam Deputy Speaker. If I have time towards the end, I will take an intervention from the right hon. Gentleman.

The second feature of the settlement is that we have prioritised spending on adult social care—the care that we provide to our elderly and vulnerable citizens. [Interruption.] Labour Members groan and complain, but they should recognise that in response to the requests of local government, the Government have done something that the previous Government did not and established funding arrangements to ensure that we can protect our elderly and vulnerable citizens.

In September, the Association of Directors of Adult Social Services and the Local Government Association made a submission to the spending review—“Adult social care, health and wellbeing: A Shared Commitment. 2015 Spending Review Submission”—in which the two organisations jointly requested that an extra £2.9 billion be made available by 2020. With the introduction of the 2% social care precept and £1.5 billion made available to councils through an improved better care fund, up to £3.5 billion of extra funding will be available for adult social care by 2019-20.

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[Greg Clark]

The hon. Gentleman and the hon. Lady should be patient. I have given way to their hon. Friend, and I am going to make some progress.

That point was made repeatedly during the consultation by councils from all across the country and under the leadership of all political parties. That is why I will conduct a fundamental review of the needs-based formula to govern the change to 100% business rates retention, which I have described. It is not only the changing needs of different areas that need to be recognised, but the differing costs of providing services to residents depending on the area a council serves. As my hon. Friend the Member for Tiverton and Honiton (Neil Parish) was saying, the rural services delivery grant, which recognises the extra costs encountered by rural authorities in delivering services, is bringing £15.5 million into such councils this year. This settlement increases the grant more than fivefold to £80.5 million, which will ensure that there is no deterioration in Government funding for rural areas, when compared with urban areas, for the year of this statutory settlement.

[Liam Byrne]

The Secretary of State is being characteristically generous. However elegant the strategy, he must surely take a moment to look at the results. What Buckinghamshire gets from the Government will have been boosted by 11.4% by 2016-17, while Birmingham has been battered and is losing 10%. I welcome the shift to a needs-based formula, but surely he must see that massive discrepancies are emerging, when great cities such as Birmingham are being battered to bits.

[Greg Clark]

The right hon. Gentleman is an intelligent man, so he should go away and study the changes in the formula. When I met the former leader of his city, Sir Albert Bore, he recognised, as has the Institute for Fiscal Studies, that it is fair to proceed with an approach that looks at all the resources that are available to local councils. On that basis, his city of Birmingham, for which I have enormous ambition and regard, has benefited significantly. Of course, the transitional grant is for places that did not benefit from the changes in the formula.

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[Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I want to make just three points to the Secretary of State. Let me start by saying that, as he knows, he has enjoyed a good reputation among many Labour Members. I am afraid that that reputation has taken a bit of a battering from the settlement he presented this afternoon. It is with some sorrow that I say that.

I simply cannot square with any sense of fairness an outcome that means that budgets in Buckinghamshire will rise by 11.5% by 2016-17, while budgets in Birmingham will fall by 10% over the same period. Quite frankly, the battering of Birmingham has gone on for far too long. We had looked to this settlement for some sense of salvation.

I will be grateful for small mercies, and I am grateful that the Secretary of State recognises Birmingham’s case that there is a fairer funding formula to be had. The challenge is that the Secretary of State does not plan to introduce that new settlement until 2016-17. There is nothing to accommodate the shortfalls in 2014-15 or 2015-16. Yet if we were on the funding formula that the Secretary of State acknowledges would be good, an extra £98 million would be flowing into our city right now.

The Secretary of State has said that that is not realistic because there is a fixed budget: what comes from one authority is what goes to another. We listened to those arguments, yet in the past couple of days, lo and behold, from down the back of the sofa in the Secretary of State’s office comes £150 million of transitional funding, plus £90 million in rural delivery grant, none of which is available for the city of Birmingham. There is no attempt to address the unfairness of past settlements or to tackle our weaker ability to raise a social care precept, no confirmation of flexibility about capital receipts, no clarity on our four-year settlement, and no way of bringing forward any funding in the better care programme for social care. The reduction in our spending power is twice the national average, despite the extra needs in our city.

In the weeks to come, I hope that the Secretary of State will reflect on not only the knock-on effects on local government, but the danger of knocking over the health service in east Birmingham. As he knows, my constituency is home to Heartlands hospital, which has been put into special measures, has a £54 million deficit and has now been taken over by Queen Elizabeth hospital. There is unprecedented pressure at the front door and A&E, which is exacerbated because the crisis in the social care system means that it is so much harder to get older residents out and into their homes. The delayed discharge rate at Heartlands hospital has increased over the past year by four times the national average. According to the House of Commons Library, public funding shortages are driving that whopping increase. Delays due to public funding shortages have increased by 1,000% in the past year.

I put it as gently as I can to the Secretary of State: we have a funding crisis in social care that threatens to knock over our national health service. I know that he will say that funding solutions for social care are coming down the track, but the crisis in our health and social care services is not in the years to come, but now. On top of that, Birmingham City Council anticipates that it will have to take another £92 million from social care in the next couple of years. That is not credible or realistic, but intensely dangerous. Birmingham demands new solutions from the Secretary of State, and not for the years to come. Birmingham needs them now.

[Mark Spencer (Sherwood) (Con)]

It is a pleasure to follow the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), who has great experience of working in the Treasury. I gently say to him that I would be more than happy to offer him a deal—not that I have the power to do so at the moment—of swapping per capita funding for his constituents in Birmingham with that for constituents in Nottinghamshire, East Yorkshire, Cornwall, or any such rural area. Today, per capita funding—[Interruption.] If the right hon. Gentleman wants to intervene, he can do so, but shouting from a sedentary position is not the thing to do.

[Liam Byrne]

Let me offer the hon. Gentleman a deal: will he join me in arguing for a special and strong weighting for poverty in the needs-based formula that the Secretary of State plans to review?

[Mark Spencer]

I am more than happy to argue with the right hon. Gentleman, and stand side by side with him if we are talking about older people and those who are less wealthy, who tend to be found in rural areas. That is the challenge that we face today. In those rural areas, the population is not only older, but less wealthy and people have further to travel to the resources and services that they desperately need. For someone who lives in a rural area, needs a hospital appointment and has to use public transport, the public transport links are not as good as they are in urban areas. The doctor is further away than a doctor in an urban area. There are much greater challenges for those who live in rural areas.

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[Simon Hoare]

My hon. Friend is right. Frankly, the Opposition party has been rumbled on this. Let us not kid ourselves, this remains, even after the welcome announcement made by the Minister on Monday, a tough settlement. It leaves an unfair and unsustainable gap between funding for rural and urban areas. That continues. It has just been made a little less tough. There is no golden goose being given to Tory local government.

[Liam Byrne]

I hope that the hon. Gentleman will take back the point about synthetic rage. If other hon. Members had a hospital such as the one in my constituency, which is £54 million in deficit, and where delayed discharges are up 1,000% in a year because of public funding cuts, they would have a responsibility to stand up and say, “Think carefully about how you distribute money.” If they are representing a city such as Birmingham where there is another £92 million to come out of social care on top of the crisis that is already there, then, collectively as a country, we have a problem. I hope that the hon. Gentleman will take back his comment and recognise that there are genuine questions about the distribution mechanisms being put forward by the Secretary of State.

[Simon Hoare]

If Birmingham City Council is funding its local hospital, it might explain some of its problems. That is not a responsibility of the city council. I do not know how the right hon. Gentleman has the brass neck to stand and ask Government Members to retract comments when the note he left in the Treasury continues to hang like an albatross around his and his party’s neck.

[Liam Byrne]

On that point—

[Simon Hoare]

I will not give way to him.

[Liam Byrne]

It is because he is frit.

[Simon Hoare]

No. Of the right hon. Gentleman, I am never frit. Of course I will give way.

[Liam Byrne]

I am grateful to the hon. Gentleman, who is being courteous and collegiate in giving way. He will also remember that I left a Budget that was going to halve the deficit over the course of the Parliament, which his Chancellor has still failed to achieve.

[Simon Hoare]

The right hon. Gentleman has obviously been to Specsavers—he has the rose-tinted glasses and he is looking through a completely different Labour history.