Local Government Finance Settlement

Lord Ahmad of Wimbledon Excerpts

Thursday 22nd January 2015 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Lord Ahmad of Wimbledon) (Con)]

My Lords, I join other noble Lords in acknowledging the excellent contributions and two maiden speeches. I congratulate my noble friend Lady Pinnock on her maiden speech and reassure her somewhat. Her sense of getting lost in the House is something that perhaps those who have been here slightly longer and much longer still experience. That is not an individual experience. From her maiden speech, we have seen that she is going to be an incredible asset, to the party, to the Government and, indeed, to your Lordships’ House.

I turn to the excellent and reflective speech of the right reverend Prelate the Bishop of Southwark. Everyone has laid claim to the diocese of Southwark. I suppose that, being Lord Ahmad of Wimbledon, I can also lay claim to being part of the diocese of Southwark. I look forward to working with the right reverend Prelate as another representative voice of the town of Wimbledon. I welcome his contribution today. We look forward to the contributions of both noble Lords in future debates.

It would be remiss of me not to pay tribute to the noble Lord, Lord Beecham. I was listening very attentively to all the contributions and I want to single out the description that the noble Baroness, Lady Armstrong, gave. She said that she described her relationship with him, when she was Local Government Minister, as one of deep respect, at times friendship as well—I would add to that—and she did not always agree with the noble Lord. I think that sums up my relationship with the noble Lord as well, although I was a bit concerned when the noble Lord, Lord Liddle, said that he would pose a challenge. He then talked about the 47 years of experience of the noble Lord, Lord Beecham, in public life. I must admit I have not been around for 47 years, so I thought he was going to pose the challenge that I would have to account for every year. I am sure that when he writes his autobiography we will all reflect on those worthwhile years. In thanking him, he will not be surprised to hear that I cannot agree with most of what he said about the challenges of the settlement.

The Government have inherited the largest deficit in post-war history. Thanks to the actions that we have taken as part of our long term economic plan, the deficit is falling, the economy is growing and employment is at a record high. The Government are putting our public finances back on track. Of course, we could not have done this alone, and I fully acknowledge the incredible effort and significant contribution that local government, like every part of the public sector, has made. Councils all over England have responded strongly to the challenge of delivering public services in this new context. I thank my noble friends Lord True and Lady Eaton for their words of support and for highlighting some of the challenges that remain.

Of course, there is much still to do. English local government accounts for about a quarter of all public expenditure, more than £114 billion this year. So the Government still need to take difficult decisions on local government funding to ensure that the public finances are on a sustainable path. Local councils will continue to play their part in this.

Much has been made of the delivery of a fair settlement. The noble Lords, Lord McKenzie, Lord Liddle and Lord Rooker, and the noble Baroness, Lady Jones, all mentioned it. We announced the provisional local government finance settlement on 18 December, as many noble Lords acknowledged. With this settlement, we have kept the overall reduction in local authorities’ spending power to 1.8%, one of the lowest levels of reduction under this Government. If we include the funds that the Government have provided to support local transformation, the overall reduction is even lower, at 1.6%.

I acknowledge that councils are facing the highest demand for services. They continue to receive substantially more funding and we are continuing to ensure that no council will face a loss of more than 6.4% in their spending power in 2015-16, which is the lowest level in this Parliament. The noble Baronesses, Lady Armstrong and Lady Farrington, talked of relative needs. These were reflected in the funding baselines at the outset of the new system of business rates retention in 2013-14.

Growth is also a key part of this Government’s agenda. Throughout this Parliament, we have deliberately shifted the emphasis from keeping authorities dependent on grant to providing councils with the tools they need to grow and shape their local economies.

The noble Lord, Lord Beecham, asked about the LGA and the NAO figures. The NAO estimates a 37% reduction in spending power, but the Government’s spending power figures are transparent and allow others to calculate their own figures. The NAO does not include the better care fund or public health, which are two important policy initiatives worth more than £6 billion. Various figures for settlements and spending power were cited—we could have this debate all evening and further into the night. There is no doubt that some authorities have had reductions, but, when we look, for example, at the new homes bonus, we see that Leeds has seen an increase of £1.92 million, Salford £27.94 million, Warrington £22.67 million, Ryedale £40.59 million, East Riding of Yorkshire £5.02 million and Kirklees £3.86 million. Those are positive figures.

We have also given councils a real stake in stimulating local growth. Authorities up and down the country are benefiting from the greater powers and incentives that we have provided to invest in growth. These include Newcastle. I am delighted that the noble Lord’s council has also benefited and has frozen its council tax for the past four years in response to the challenge laid down by the Government. The noble Lord shakes his head. Is it not true?

[Lord Beecham]

Not next year.

--- Later in debate ---

[Lord Ahmad of Wimbledon]

Of course I said for the four years up to where we are now. I am sure that, under his direction, the council will respond to future challenges.

My noble friend Lady Janke asked about devolution, which is a subject high on the Government’s agenda. I would assure her that Newcastle, Sunderland and Northampton have seen the greatest growth in the amount of business rates retained in 2013 as a result of enterprise zones and new development deals. We have done city deals with Manchester and Sheffield. Additionally, we have provided £730 million in Growing Places funds. We have also emphasised a close working association with local enterprise partnerships—that is part of my ministerial responsibility when it comes to European funding. Local priorities have been reflected in ERDF funding up to 95%, and also in European social funding. For 2014-15, authorities’ own estimates show that 91% are expecting a growth in their business rates—a total of £414 million.

The noble Lord, Lord Rooker, talked about issues to do with cities. He mentioned Birmingham. I trust that my noble friend Lord Whitby addressed some of his concerns. Looking at some of the figures, for example, during the period 2010 to 2014, the reserves in Birmingham increased by £221 million, or 396%—and that was from a relatively low base—notwithstanding some of the serious challenges the city has had.

Councils benefit directly from the new homes bonus as well, bringing long-term empty homes back into use. We have provisionally allocated £1.2 billion of new homes bonus funding to local authorities in England for 2015-16, and this brings the total to almost £3.4 billion since the scheme began.

The noble Lord, Lord McKenzie, raised issues of business rate retention and excesses. The excess of central business rates over revenue support grant will be returned to local government through specific grants, of which there are many across government, thus complying with the statute. I shall write to him with specific examples if he so desires.

The noble Lord, Lord Tope, talked about the direction of travel when it came to the retention of business rates. I can assure him that my right honourable friend the Secretary of State, whom he, too, knows well, has indicated his personal commitment to see business rates retained locally—perhaps to a level of 90% from the current 50% by 2020, if financial circumstances allow.

The noble Lord, Lord Rooker, also talked about the rural economy. We continue to recognise the challenges faced by rural communities. The Government have a clear commitment to rural areas, and consecutive settlements have helped to address the gap in urban/rural spending power. The gap is closing and has already benefited rural authorities to the tune of £208 million over the last four years. I assure the noble Lord that we expect this gap to continue to close. In the mean time, the settlement confirms another year of additional resources for most rural authorities, to recognise the challenges they may face in delivering their services. In 2015-16, this grant has been increased to £15.5 million.

The noble Lord also rightly raised the issue of broadband. I will share with him a personal experience. I went to Cornwall and the Isles of Scilly to launch a broadband service with senior management and the chief executive. The only hitch was that we were unable to land on the Isles of Scilly because it was clouded over. I have never been, but I saw an aerial view and hope that I shall return one day. We are investing a great deal more—£780 million has been allocated to roll out broadband—with priority given, exactly as the noble Lord suggested, to the hard-to-reach areas.

My noble friend Lord Shipley talked with great aplomb about the need for transformation and for local authorities to lead. I was heartened by the contribution of the noble Lord, Lord Smith of Leigh, most of which I can relate to and agree with. As well as growing their economies, the best authorities are transforming the way they do business. This includes places such as Devon, where libraries are being expanded into community hubs, providing a greater range of services, including those designed to tackle digital exclusion and improve employability skills.

The Government are also supporting councils to demonstrate innovation, achieve real savings and, most importantly, improve outcomes for the people who use local services. In November we announced 73 projects that had successfully bid for the Transformation Challenge Award. These projects will receive about £90 million to improve services, and will ultimately save the public sector more than £900 million.

I turn to the better care fund and refer briefly to the Troubled Families programme. That programme has illustrated how together, government departments working closely with local authorities can achieve the best results for our residents—indeed, the citizens of our country. We have therefore created the better care fund. It has a £3.8 billion pooled budget for health and social care in 2015-16. My noble friend Lady Eaton spoke with great eloquence about that initiative, which will help drive further and faster integration between those services.

Local partnerships have chosen to pool an extra £1.5 billion, and this will help to achieve significant change in services that will benefit some of the most vulnerable in society. That was a specific concern expressed by the right reverend Prelate the Bishop of Derby. We are looking to prioritise those areas where there is greater partnership working. As the right reverend Prelate will know, on a wider scale we have looked to the community directly, and the Near Neighbour scheme, so ably chaired by my noble friend, has shown dividends from communities working on the ground together to provide the best services and the best initiatives to create the more cohesive communities that we all desire.

As noble Lords have said, and I fully acknowledge, the challenge for local government over the next few years is substantial, as it is for everyone managing public services. I fully acknowledge that there is huge energy and commitment in the sector to deliver the best possible public services for our local communities. I know that members and officers up and down the country are already thinking radically and creatively about the years ahead, and we will continue to support them. I assure the noble Lord, Lord Liddle, among others, that we will work with them directly to ensure that we get the best service provision at a local level.

Local welfare provision was raised by several noble Lords, including the noble Baroness, Lady Donaghy. We will work closely with colleagues in the Treasury and the Department for Work and Pensions. We have been analysing the responses to our consultation. I have met two or three councils directly, along with my honourable friend Kris Hopkins. This concern has come up consistently among local authorities’ priorities. We have been looking at how local welfare assistance should be funded in 2015-16 and, as I said, working with the Department for Work and Pensions on it. The Government believe that local authorities will continue to be able to offer local welfare assistance for 2015 from within existing budgets, alongside a range of other services if they judge it to be a priority in their area.

The right reverend Prelate the Bishop of Portsmouth talked about earmarking certain funding. There are demands for greater devolution and for local authorities to judge their priorities. It is our view that this is what should prevail in this area. We have consulted on having a separately identified amount relating to local welfare provision in each upper tier authority’s general grant, totalling £129.6 million nationally. This will not be ring-fenced and we will not be placing any new duties, expectations or monitoring requirements on its use. The Government have also been very clear that councils should choose how best to support local welfare needs, because what is right for Croydon will not be right for Cumbria. In relating that, I hope that I address some of the concerns expressed by, among others, the noble Lord, Lord Whitty.

The right reverend Prelate the Bishop of Portsmouth raised the issue of vulnerable women, particularly those who suffer domestic violence. Recently I announced from this Dispatch Box an additional £10 million of funding for women’s refuges up and down the country, which will benefit more than 100 local areas.

I assure your Lordships that the Government will consider all responses to the consultation on the settlement, including those which relate to the provision for local welfare over existing budgets, and will take these into consideration when announcing the final settlement.

All councils should be freezing their council tax in 2015-16 to help people with the cost of funding. The noble Viscount, Lord Hanworth, and the noble Lords, Lord Smith and Lord McKenzie, raised the issue of referendums. A referendum in 2015-16 can be held at reduced cost when combined with the general election. If a council has a good case for an increase above the 2% threshold, we believe that it should trust its electorate.

There were other points covering some of the areas that I look after, such as tackling fraud, but time does not permit me to go into them. If specific questions have been raised, I shall of course review Hansard to ensure that we answer them.

Finally, I wish to put on record the thanks of the Secretary of State, as well as other ministerial and governmental thanks, and mine, to all councils that are working tremendously hard in ensuring the best local services. I believe that anyone who goes into public life does so with the right intent. As we have heard from several noble Lords today who have represented electorates at a local level, it is for the right reasons: to serve their electorate to the best of their abilities.

Finally, it falls upon me to thank once again all noble Lords for their contributions, which have again provided a very informed and deep insight into the debate over local government finance. I am sure that I am accurate in saying that it is not the last time we shall discuss it. Nevertheless, the quality of the debate that we have had has again demonstrably shown the best of this House.