Local Government Funding: Rural Areas

Lord Garnier Excerpts

Monday 11th January 2016 Commons Chamber

[Sir Edward Garnier (Harborough) (Con)]

If the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) will forgive me, I will not follow him up the highways, byways and glens of Scotland. I find local government finance complicated enough without adding in a Scottish element. As he has spoken in the debate about local government funding for rural areas, which of course include vast swathes of Scotland, I hope that he will let us know during the course of the evening whether his party will vote in February when we come to discuss the final settlement for these proposals, which may or may not have a direct effect on Scotland. Given the way in which the Scottish nationalists’ rhetoric has been going since the May general election, they will no doubt claim that it has an indirect effect on the matter. I am sure that the Government will listen with great interest to whether Scottish National party Members of Parliament will be here on that night in February. That might have some bearing on the Government’s thinking.

In the 24 or so years that I have been in this House, I have deliberately never spoken about local government finance because it is an impenetrable subject. I am grateful to my hon. Friend the Member for Beverley and Holderness (Graham Stuart) for having spoken so cogently and clearly on the subject today and for leading our campaign to persuade the Government to treat rural areas more fairly when it comes to local government finance.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

Does my right hon. and learned Friend share my view that, in the extremely eloquent speech made by my hon. Friend the Member for Beverley and Holderness (Graham Stuart), he omitted to mention “The Picturesque”, which of course comes originally from Herefordshire, as described by Gilpin? Does he also agree that our hon. Friend was the most picturesque adornment present on these Benches as he gave us his presentation? Does my right hon. and learned Friend share my view that the counterpart to the extraordinarily poor settlement that rural areas have received might involve not only an improvement in that settlement on the current basis but also additional capital funding to allow rural areas to develop an economic strength from which future revenue could derive?

[Sir Edward Garnier]

A number of points flow from my hon. Friend’s intervention. First, he confirms why it was sensible of me never to have spoken about local government finance. Secondly, I agree with him that Herefordshire is a beautiful county, and he illustrates that, but many of us who represent shire counties do not just represent rural areas. For example, my constituency is 90% rural geographically, but 50% of my electorate come from a suburb of Leicester—Oadby and Wigston, a borough in need of special attention from the Government. I have discussed that with the Minister and I will bring the matter back before the House before very long.

My hon. Friend the Member for North West Leicestershire (Andrew Bridgen) and my right hon. Friend the Member for Rutland and Melton (Sir Alan Duncan) are in their places tonight. Because we represent that bit of Leicestershire outside the city of Leicester—there are seven Conservative Members of Parliament for the county of Leicestershire and three Labour Members for the city itself—it is assumed that we all represent, and all our constituents live in, wonderful leafy idylls. I refer to the pre-penultimate paragraph of the speech made by my hon. Friend the Member for Beverley and Holderness there. There are, however, people living in my constituency, for example, in South Wigston, Market Harborough, Fleckney and Kibworth, who are not at all well off. Market Harborough is a market town, as its name suggests, but Kibworth and Fleckney are large villages. As my right hon. Friend the Member for Rutland and Melton would agree, there are people living on farms and in little hamlets who are not at all well off. The fact that we represent so-called “shire counties” does not mean to say that everyone there drives around in a Range Rover and is looking forward to the next cheque from the common agricultural policy—life is not like that.

As has been mentioned, school funding in our area is second bottom of the Whitehall funding list, although it costs just as much to educate a child in rural or semi-rural Leicestershire as it does in the city of Leicester. Indeed, many schools in the borough of Oadby and Wigston, which abuts for three or four miles the city of Leicester, are educating city children, who come across the boundary into the county of Leicestershire because, by and large, the schools in my constituency, and no doubt in the equivalent parts of the county around the border of the city of Leicester, are, on average, better than those in the city. Yet we have to pay for the education of those children from the city of Leicester with the much-reduced county funding. That is just an illustration of the problem we face year on year.

[Victoria Atkins (Louth and Horncastle) (Con)]

In a rural area such as mine, where my local district of East Lindsey covers 700 square miles, most of which forms my constituency, there is an added problem with transport. It costs Lincolnshire County Council millions of pounds to transport children across the county to their nearest school, a cost that, happily, most city centre children do not have to bear.

[Sir Edward Garnier]

I agree on that, and my hon. Friend illustrates the sparsity factor. I am getting into the jargon now—you might almost think I am beginning to enjoy myself, Madam Deputy Speaker, but I do not want you to get that impression. On the sparsity factor, getting schoolchildren from parts of rural Lincolnshire or rural Leicestershire to the town centres where the schools are is an expensive activity and the county councils are finding it increasingly difficult to subsidise it, to the concern of the parents of those children.

I do not wish to think of this as being as complicated or difficult as the Schleswig-Holstein question, but I sometimes think that either I am either dead or mad, or I have forgotten the answer. Lord Palmerston, one of our greatest Prime Ministers, said that only three people knew the answer to the Schleswig-Holstein problem—one was dead, one was mad and one had forgotten the answer. That is a diversion, I hope.

I am relying heavily here on a note provided by the excellent Conservative leader of Leicestershire County Council. The council recognises that the Government wish to use “spending power” as the only means of discussing the funding available to local authorities and that there are financial constraints—there is a limit on the amount of public money available. In government jargon, “spending power” means Government-funded spending power—I know this gets very exciting, Madam Deputy Speaker—which means core spending power minus council tax. It consists of the settlement funding assessment, the new homes bonus and the rural services delivery grant, and from 2017-18 it will also include the improved better care fund—would that Lord Palmerston were with us now!

The Government’s proposed changes to the revenue support grant, designed to limit reductions in funding for the local authorities most dependent on RSG, such as inner-London boroughs and cities, will have a significant impact on Leicestershire and other similar counties. They will mean a £6 million additional loss of RSG, making a total reduction for the county council of £19 million in RSG for 2016-17. The additional loss to all counties amounts to £160 million. The Government’s proposals also will mean that £2 million of retained business rates will be lost to Leicestershire in 2019-20 as those are redistributed—guess where, oh Conservative Government—to cities and inner-London boroughs. I am not making this up. These changes can fairly be seen as the latest in a series of “compromises”—I say that politely—made by successive Governments.

Let me quickly illustrate how the system is not working now. The RSG does not take account of the needs of the local population. RSG per head in 2016-17 in Leicestershire, which includes the seven or eight district councils or borough councils outside the city of Leicestershire, is £67, whereas the figure for Islington is £246 and the figure for the city of Westminster is £251. Council tax per head at band D in 2015-16 for Leicestershire, including the districts, was £490, whereas the figure for Islington was £416, with the city of Westminster figure at £352. One sees straightaway from those examples the imbalance that the campaign led by my hon. Friend the Member for Beverley and Holderness has been so successfully highlighting.

Spending power—I referred to that complicated compendium a moment ago—is apparently how the Government define income to a local authority. The Government headlines around the provisional settlement and the so-called “good news” are directed towards the position right at the end of this Parliament, in 2019-20, and not to the current year. My colleagues in the county council welcome the principle of a four-year settlement, but not if its certainty increases the savings required and compels further service reductions in the short term, and does not take account of spending pressures at the end of the four years, when a projected 3.5% increase in spending power for Leicestershire will be totally inadequate. That sort of increase would simply not meet the needs of the over-65s, an increasing school-age population and the cost of the living wage. For example, the cash increase in spending power for Leicestershire County Council by 2019-20 equates to £12 million, but that is the context of living wage costs to the council by 2019-20 of £20 million. The 2% adult social care precept equates to £22 million, which compares with the increase in adult social care costs, including the living wage, of £50 million over the same period.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

My right hon. and learned Friend is making some very good points, particularly on adult social care. We are finding that, increasingly, people choose to retire to rural areas, where life expectancy is higher. Adult social care is the part of the upper tier local authority budget that is increasingly suffering from great strain. Does he agree that, when we are looking at local authority budgets and at the demographic needs of rural areas, the increasing pressure on adult social care budgets and the increasing number of people requiring adult social care in rural areas because of that demographic shift to an older population is something that needs to be put into those budgets today? We also need to future-proof those budgets and the projected increases in Government spending in the years ahead.

[Sir Edward Garnier]

I am sure that that illustration applies both to my county of Leicestershire and to my hon. Friend’s county of Suffolk. As a doctor, he will have seen how that matter touches on his constituents directly. Certainly in Leicestershire, 50% of the £350 million revenue budget is spent on adult social care. If my hon. Friend is right, that percentage can only go up as we move through this Parliament and beyond it, so the points that he makes have even greater purchase than perhaps he might have initially thought. It seems, too, that the scope for savings is necessarily restricted. As a result of the provisional settlement, Leicestershire needs to save £28 million in 2016-17, increasing to a total of £83 million by 2019-20 just to ensure that it is living within its means. That is on top of savings that the county has already achieved of £130 million.

I do not pretend to have an instant solution to any of this; I do not suppose that any one of us does, but I urge the Government to think a little more intelligently about how it deals with local government finance and how it distributes what is accepted to be a limited pot of money across the country. Without wishing to be rude to the hon. Member for Inverness, Nairn, Badenoch and Strathspey, I urge Members to forget about Scotland for the moment—it is a difficult thing to do, but we will do it just for this evening—and to call on the Government to work out what is fair. A poor person in Harborough is no better off than a poor person in inner-city Leicester. A poor elderly person in Harborough needs as much financial support as a poor elderly person in the city of Leicester. I appreciate that there will be rough edges and that there is no perfect solution to the problem, but I am reasonably sure that there is a better solution than the provisional settlement that we are looking at now.

Leicestershire is a well-behaved Conservative council—I do not mean that in a pompous way, although I have been accused of many things and pomposity may be one of them. It believes in using taxpayers’ money well and in getting good value for every public penny spent. We are not about to initiate some sort of riot or revolution in Leicestershire County Council. We are just asking for a bit of fairness—not a difficult thing to ask for. Although I do appreciate that that is hard to deliver, I none the less think that the Government should try just a little bit harder.

--- Later in debate ---

[Mr Jones]

I hear what my hon. Friend says. Council tax is now 11% lower in real terms than it was in 2010. The Government’s assumptions do not assume a 2% increase in council tax, but a consumer prices index inflation increase in council tax. The calculations also show that once we get to the end of this Parliament, if councils were minded to take up the flexibility that has been offered, council tax would still be lower in real terms than it was in 2010.

[Sir Edward Garnier]

My hon. Friend is doing the best he can and is doing exceptionally well, I am sure. He said that the increase would not be as high as anticipated, but what is the expected increase in council tax that the Government are planning for? That is what we want to know.

[Mr Jones]

It is down to local authorities whether they feel it right to increase council tax. As I said, the increase that has been built into the figures is 1.3%, which is currently the rate of inflation, and that does not factor in, as I said, an increase up to the 2% referendum principles.

Let me deal with the issue that my hon. Friend the Member for Beverley and Holderness raised in relation to full business rate retention. I can assure the House that a number of consultations are still to be undertaken on full business rate retention. No details have been finalised on how that system will work. Obviously we need to ensure that no areas are left behind when we move to the new system, which has been welcomed, as hon. Members have said, and that includes safeguarding a number of rural authorities that are not in as strong a position as many urban authorities when it comes to raising business rates.

We also need to ensure that we incentivise local areas to increase their business rate base and increase growth and the jobs that come with it. We need to look at that in the context of balancing that reward with the risk associated with challenges on revaluations and when business rates are no longer collected. Such instances were mentioned earlier in the debate. I just want to reassure my hon. Friend the Member for Beverley and Holderness that the Government are considering that very carefully for the future.

My right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) made an extremely powerful case for county areas that include both rural and urban areas. The hon. Member for Workington (Sue Hayman) put the case for Cumbria and mentioned the challenges faced by rural authorities, particularly those affected by the recent flooding. The Government obviously have a great deal of sympathy for the people facing those challenges in Cumbria. We have put forward a significant support package of £60 million to help people in places, such as Cumbria, that have been significantly affected by the recent flooding.

My hon. Friend the Member for North Dorset (Simon Hoare) raised a number of issues. He said that he would like to see more opportunities for district councils to implement a £5 increase in their council tax, rather than the 2% referendum principle. He mentioned the challenge around local planning fees, which I am sure is something we will take on board. He also mentioned the importance of adult social care, as did my hon. Friends the Members for Thirsk and Malton (Kevin Hollinrake) and for St Ives (Derek Thomas) and a number of other colleagues. As I said earlier, the Government are putting forward an additional £1.5 billion through the better care fund. I would like to reassure hon. Members that, unlike the current iteration of that fund, the £1.5 billion will all be going to local government.

I completely agree with my hon. Friend the Member for South East Cornwall (Mrs Murray) that car parking should not be used, as she put it, as a cash cow. The figures we have prepared certainly do not take into account any increase in fees and charges that local authorities might wish to make.

My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) made a number of points, one of which was the need, in his view, for local government reorganisation. The Government are willing to listen to proposals, but I am sure that he will know that they must be local proposals that are brought to the Department.

My hon. Friend the Member for North Devon (Peter Heaton-Jones) made a number of points. He mentioned coastal deprivation, which is an extremely important point. He will be glad to know that the coastal communities fund has been extended for another three years, with £90 million. He invited me to visit Ilfracombe, and I look forward to doing so the next time I am in that neck of the woods. During the summer I spent several periods in Cornwall and Devon on visits. I was extremely impressed by the approach of many areas, particularly how local government was trying to deal with the challenges that are currently faced.