Freedom of Establishment and Free Movement of Services (EU Exit) Regulations 2019
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Lord Anderson of Ipswich (CB)
My Lords, the main issue from a legal perspective is how the use of delegated legislation can be justified, contrary to past undertakings, for a significant policy change that reduces, or appears to reduce, acquired rights. I agree with everything that the noble Lord, Lord Stevenson of Balmacara, and my noble friend Lord Pannick have said about that, and I need not weary your Lordships with any more, but I shall address two other points. The first relates to the practical effect of what the Minister in the Commons accepted on Monday is the potential disapplication of rights. The Government must accept that those rights have some value, as my noble friend Lord Pannick said, because of the position that to maintain these rights in favour of EU-plus nationals might violate the most favoured nation principle of the WTO. Indeed, the Secondary Legislation Scrutiny Committee records BEIS as saying that those rights afford a guarantee against,
“additional restrictions or barriers that may apply to nationals and businesses from other countries”.
I am puzzled by the suggestion that the removal of these directly effective rights, in particular the right not to be discriminated against in the delivery of services or in owning or managing businesses, will have limited or no practical impact.
The Minister has said, no doubt rightly, that our law will be in accordance with EU law on exit day, but because the rights have direct effect they afford protection, by definition, over and above that contained in domestic law. Without these rights, where are the equivalent entitlements and remedies not to be discriminated against to be found in our law? Nor am I entirely clear whether the right of all EU nationals to apply for settled or pre-settled status, even if that right is successfully exercised by the end of 2020, is a full substitute for the right of residence derived from the directly effective right of establishment under the Immigration (European Economic Area) Regulations 2016. Will he explain further whether it is the case—and if so, why—that the removal of these important rights, leaving aside the special issue of satellite decoders, will have only de minimis impact in the respect I have identified?
My last point relates to the specific power under which these regulations are made, Section 8 of the European Union (Withdrawal) Act 2018, which is available only where there is a failure of retained law to operate effectively, or some other deficiency in retained EU law, as was said by the noble Lord, Lord Stevenson. I make another point in relation to that: deficiencies in retained EU law are exhaustively defined in Section 8(2) and (3) of the Act, but I cannot find any definition there that fits the present case. There is some suggestion in the Explanatory Memorandum that the deficiency consists of lack of reciprocity, but it is not clear, certainly to me, how a deficiency could arise from the possibility that others might choose to withhold equivalent rights in their own law. If that were the case, then the scope of Section 8 would be very broad indeed. Can the Minister say any more about which provision of Section 8 is relied upon as a sufficient basis for these regulations and, if so, how?
Lord Greaves (LD)
My Lords, I have been listening with great admiration to the knowledge and expert understanding of all this of noble Lords who have spoken. I thank the noble Lord, Lord Stevenson, for tabling his amendment and my noble friend Lord Oates for explaining it all, so that I understand it a bit more.
The right reverend Prelate and other noble Lords referred to UK citizens living in other EU countries and the effect that the whole Brexit thing is having on them. We have friends who live in the south of France and operate a small business there, and they have just held up their hands and applied for and obtained French citizenship as the only way they thought they could secure their position and their business there. There is a clear understanding among a lot of British citizens in other EU countries that in the negotiations so far, the Government have not taken their interests fully into account.
On this regulation, when we were discussing settled status during Question Time this afternoon, the noble Lord on the Opposition Front Bench declared a personal interest, so I suppose I ought to declare a personal interest in that my daughter’s husband is a European Union citizen and they live in this country. They work from home; I must confess that I do not know whether they are technically self-employed, have a zero-hours contract or both, but they certainly have a highly technical, successful operation, which is inherently insecure as it depends on the organisation that provides them with work. Sometimes there is none and at other times there is a lot. They are very concerned, not only about these regulations but about their position, so they asked me to take a look at this.
I looked at it and read the Explanatory Memorandum, knowing that this is where I would find the truth, the whole truth and nothing but the truth from the Government. It asks:
“Why is it being changed?”
As noble Lords have said, it says that Section 4 of the European Union (Withdrawal) Act provides the rights in domestic law, and so on. It then says in paragraph 2.11:
“To address any inoperability and to ensure UK law continues to function effectively, with legal clarity, and that the UK is compliant with its World Trade Organization … obligations, including the General Agreement on Trade in Services, these rights need to be disapplied”.
I have read it again and again and I do not understand why, and I have heard noble Lords speak today and I still do not understand why. However, what concerns me is not that I do not understand this—what inoperability there may be or what conflicts there may be with the rules of the WTO—but that the Government do not seem to know either. The Explanatory Memorandum talks about “any inoperability”; is there any or is there not? I presume that the Government have taken legal advice on this and have a belief as to whether there is or is not. Because they think this legislation is necessary, I assume that they think there is, but they do not want to tell us exactly what it is.
Later, paragraph 2.12 says:
“These directly effective rights of establishment and free movement of services would appear to have limited practical effect, post-exit in a no deal scenario”,
but the Minister is telling us that the Government do not think that it will have any effect in practice. Will it have a limited effect or not really any effect? If it will have a limited effect, can the Minister tell us exactly what that limited effect is, in words that I, as a non-lawyer and a non-expert in these WTO matters, might understand? The Minister himself used the word “could” about three times—“It could have an effect”. But will it or will it not? What is the legal advice, or is it all very vague and nobody knows?
However, the Explanatory Memorandum reassures the individuals and businesses concerned:
“Individuals and businesses will be able to check published no deal planning guidance on gov.uk”.
If I were to look at GOV.UK this afternoon, would I find advice on whether there is inoperability and limited practical effect, or would it tell me not to bother because there is not? If it tells me not to bother because there is not, why is this all coming here anyway?
The Earl of Clancarty (CB)
My Lords, at the beginning of this debate, the noble Lord, Lord Stevenson, said that parliamentarians are talking about this issue. The noble Lord, Lord Oates, and others, said that EU citizens are talking about this issue, and indeed, the British living and working in Europe are doing so too. They are all very worried. There is something about this issue to which the noble Lord, Lord Greaves, referred. It is a confidence issue, a trust issue and a perception issue. That is very important. There is a sense that a safety net is being removed in preparation for worse to come, despite the Minister’s assurances.
I would be appalled by any legislation that attempted to reduce the rights of EU citizens to run businesses or be self-employed in this country under a no-deal scenario. Such legislation should surely be in an immigration Bill, not presented to the House in this form as a fait accompli. As the noble Lord, Lord Stevenson, noted, we are talking about a wide variety of industries being affected. The so-called gig economy, the NHS, IT and the creative industries would be hit hard if EU citizens felt forced out, and we would be culturally impoverished as a result. However, as the noble Lord pointed out, it is not only the livelihoods of EU citizens that will be at risk, but the livelihoods of British citizens living in Europe.
It is a widely held view, but a misconception, that most British abroad are retirees. Of the 1.24 million UK citizens in Europe, Britain in Europe estimates that only 20% do not work. Many of those in work are self-employed, in as wide a variety of service industries as in the UK. It feels, however, as though the Government do not care enough about the British living in Europe, or about their livelihoods, which will without a doubt be threatened through any reciprocal effect. A number of us in this House have repeatedly asked the Government to protect the rights of the British working in Europe. This is not the right way to go about it, and that is apart from the message being sent through this legislation to EU citizens who run businesses or are self-employed in this country.
Lord Duncan of Springbank
It is quite clear that we have not succeeded in convincing the noble Lord that the reality is that the retained EU law, which this House fought so carefully over and which was enshrined in the withdrawal agreement, sets out the rights of individual EU nationals in this country with regard to their ability to be employed or self-employed, to offer services and so on. That is contained in retained EU law and will become operational and functional at that point in the future.
Here we are talking about making adjustments to that retained EU law for certain rights to invoke the previous entity of the EU as a means of engaging directly with the Government as a challenge. It is that part we are talking about today.
Lord Greaves
At a less erudite level, what advice is currently given to these people on GOV.UK?
Lord Duncan of Springbank
GOV.UK is a resource which I hope helps people address their questions. Part of the difficulty with GOV.UK is that it is very hard to anticipate questions that have not been set out in government legislation. We did not anticipate that individuals who have written would be fearful of what had been done. That is why I say again that we must be better at how we explain this in all our communications, whether online or on paper, and in the Explanatory Memorandum. The important thing for individuals to take from this debate is that the impact on them is not what has been explored or explained by others but rather a restricted aspect of future issues that concern future government policy or the ability of the WTO and the UK going forward to agree on most favoured nations.
Spending Round 2019
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Lord Greaves (LD)
My Lords, I would like to apologise for not hearing most of the Minister’s opening speech. I am afraid that the change in the arrangements passed me by completely. I apologise for that and ask for the House’s forgiveness.
The noble Lord talked about the Foreign Office and foreign matters; I want to talk about local government, in particular about the spending figures for the Ministry of Housing, Communities and Local Government. The Treasury booklet about the spending round reports that the local government departmental expenditure limit,
“will increase by £1.1 billion in cash terms”,
which is a lot and is very welcome.
“With this increase in grant, Local Government Core Spending Power”—
which is a mystical figure that everybody in local government talks about and nobody understands—
“is estimated to increase by £2.9 billion in total in 2020-21”.
Again, on the face of it, this is very welcome—and indeed it is.
“Combined with the £2.9 billion increase in Core Spending Power, these announcements mean local authorities can benefit from more than £3½ billion of additional resources”,
with increases in council tax, other grants and so on. This sounds a lot. It sounds as though things are going to be okay. I would suggest that it is not that simple, because a large proportion of that money will go towards the problems of social care and social care funding. These are pretty much in crisis in many places.
I declare my interest as a member of Pendle Borough Council, which is an ordinary shire district in the two-tier area of Lancashire. My concern is with street-level services and local community services, which district councils concentrate on providing. Obviously, unitaries provide them as well, and some county council services come into this category, such as highways and libraries. I want to give some figures from my own council in Pendle, not because is it particularly special—although I think it is—but because it is not special but typical of districts in urban areas, old industrial towns in areas such as Lancashire and many other districts around the country. A report—which goes to councillors tomorrow evening, in fact—points out that the four-year spending settlement, the funding settlement for local government, comes to an end at the end of this financial year. It also points out that there will be a real-terms increase in funding for local government overall—the “core spending power”—which is quite substantial. However, the implementation of the fair funding review and move to 75% business rates retention appear to have been put back, because people are too busy doing other things at the moment. The referendum limit for council tax increase is going back down to 2%. For councils such as Pendle, this will have a fairly disastrous effect.
The detailed implications and figures are obviously not yet known and will not be until the local government settlement comes out in perhaps two or three months’ time. However, making reasonable assumptions, the position in Pendle is that, compared with the present year, there will be a shortfall in 2020-21 of nearly £900,000 that has to be found from cuts and what are called “savings requirements” but are actually cuts. By 2022-23, in three years’ time, the requirement in that year, compared with the present year’s spending, will be around £4 million. Of course, £4 million may be a lot or it may be not so much, depending on the present level of revenue spending. In this year’s revenue budget for Pendle, the aggregate spending level is about £13 million. Over the next three years, £4 million has to be cut from £13 million-worth of spending. By any standards that is a lot, and it is typical of many districts—some will be higher, some will be lower, but it is typical. These are at current prices. This is to an authority which, over 10 years, will have cut its spending in real terms by half, or perhaps more, and in which over the period since 2010 the number of people working for it, without any substantial changes in what it is trying to do and what services it provides, has been halved. The position is dire.
These are not unimportant services. They are perhaps not as important as education, social care or the health service, which gets the high-profile headlines. They are things such as street cleansing, town-centre cleansing and work in the town centres, tackling litter and fly-tipping—if people fly-tip on verges, someone has to clear it up—refuse services, recycling services, and all the things a council tries to do in town centres to keep them as prosperous as possible, and some of ours are doing fairly well. There are also leisure facilities, the deficit on running all the swimming pools and all the rest of it, environmental health and the vital anti-social behaviour work that local authorities newly took over under the anti-social behaviour Act that came in about seven years ago. There are parks and miniparks, open space, playing fields and sporting facilities. Even if you have not got your own council housing, which we no longer do, there are the issues of housing standards and tackling empty properties, bringing them back into use, which we have been quite successful at, and planning and development services. There is also a new one: action on carbon reduction. We have a meeting next Monday evening, which I shall be at, where we will set up a working group on how we in Pendle can do our bit to help solve the climate emergency. The only problem is that we have lots of ideas for things we can do but no staff to do them. It is one of those instances where councils will have to roll up their sleeves and get much more involved.
The position on authorities like this is dire, but it does not matter that the authorities are in dire straits; what matters is that the street-level, town-centre and local community services and facilities that they provide are being stripped away to the extent that they are having a dreadful effect on the community infrastructure in a lot of places. These are places that some people call “left behind” in many cases, places that have not shared in the prosperity of Greater London and the south-east, or even the big towns and cities of regions such as the north of England. I suppose the old cliché of life in the north is that “Life is hard”, but keeping communities going in these areas is hard work. We are not being helped by the fact that, when the Government say, “Austerity is over”, whether it may be or not, the money that is available to other services and areas is not coming to us.
Spending Round 2019
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy and Northern Ireland Office (Lord Duncan of Springbank) (Con)
My Lords, I thank all your Lordships for your warm welcome on my new role. It is nice to be here for a brief time—I am not wholly convinced it will be my permanent future—but, none the less, I am interested in each of the comments made by noble Lords this evening.
I think there has been far more consensus than there has been division on some of the issues affecting wider society. I am reminded of some remarks, again, by Benjamin Disraeli, which he would have written in Sybil, a book subtitled Two Nations. He said:
“Two nations; between whom there is no intercourse and no sympathy; who are as ignorant of each other’s habits, thoughts, and feelings, as if they were dwellers in different zones, or inhabitants of different planets”.
He spoke not of different parts of this kingdom, nor indeed of different social classes; he spoke simply of the rich and the poor—a reminder again that some challenges are with us and must be addressed even now afresh.
I have also thought how we might frame this debate, and I was struck by the comments made by the right reverend Prelate the Bishop of Durham. It put me in mind of some remarks by a former Vice-President of the United States, Hubert Humphrey, who simply said that,
“the moral test of government is how that government treats those who are in the dawn of life, the children; those who are in the twilight of life, the elderly; and those who are in the shadows of life, the sick, the needy and the handicapped”.
That is a test that we need to embrace now.
In lots of ways, this particular spending review does a number of things, but it does not seek to do everything. We need to recognise the difference between what a spending review is destined to try to achieve and what a Budget is setting out to try to achieve. I take for example, one aspect, which I know a number of Lords have touched on this evening: education. It is very easy to talk about education in simple, glowing terms or in simple statistics and headlines. However, it is important to recognise that we made great strides forward in collaboration with the Liberal Democrats in our coalition Government back in the day: 85% of pupils are in good or outstanding schools, compared with 66% in 2010; there are 10,000 more teachers and 921,000 new school places since then; and there are 160,000 more six year-olds on track to become fluent readers compared even with last year.
When we look at the money we put into education, we begin to see how that money can make a difference. Money spent wisely is money well spent. I will touch upon the comments of the noble Lord, Lord Davies. The minimum per pupil funding for a primary school pupil will become £4,000, for a secondary school pupil £5,000. We are putting £66 million into early years spending, and £400 million more will go into further education. Each of these elements should create a positive pathway to move issues forward.
Social care is perhaps one of the shadowy areas that Hubert Humphrey spoke of. In many respects, this is a new area as we begin to explore how funding will work. The money we are putting into social care is significant, but it is only to stabilise the system until we can begin to understand how best we can tackle the wider challenges that exist within the social framework. For too long we have seen these simply as issues to be dealt with by the individual; there is a wider community interest which we have recognised. That is why I expect that the Budget itself, which will come later, will look at this head-on and should, I hope, begin to make a significant difference.
I will try to answer all questions in the time available, but I hope noble Lords will appreciate that there were quite a few. I will begin by picking on the right reverend Prelate, just because I happen to have the notes at hand. I hope he will forgive me. The question of health and social care that I have already touched upon will become important. The £1 billion will make a difference. There is an additional £500 million which should begin to stabilise the system. It does not solve the problems but begins to take us in the right direction.
The right reverend Prelate asked very specifically about unaccompanied children and legal aid. Unaccompanied children were brought into the scope of legal aid in immigration matters when the Ministry of Justice’s Legal Support action plan was published in February 2019. I hope that will go some way to addressing that particular issue. We are committed to ensuring that everyone can get the timely support that they need to access that justice system. If you cannot access justice, you cannot secure it. It is very simple.
There was a question on whether we should be in any way rejoicing that there are 10,000 more prison officers. In some respects, the answer to that should simply be no. That is not a way we should measure things, but it is not the only way we seek to measure things. It is about ensuring that those who find themselves in prison find a way out of prison without returning, looking at the recidivism rates themselves to ensure that people who have found their way into that troubled area are able to find their way out of it. In order to do that, we have to take the pressure off the system itself. Those 10,000 extra guards should, I hope, make some difference. However, it should not be a metric by which we measure the success of our society; it is simply a reflection of the need that these aspects have for us.
The right reverend Prelate will be aware that many aspects relating to benefits will appear in the Budget more sensibly because that is where they will rest. What we are looking at here is the departmental spending aspects. The Government are increasing spending on universal credit: it will be £2.5 billion higher in 2023-24 than when the decisions were taken in 2016.
Overseas aid is an issue very dear to my heart. The 0.7% of GDP is an important measure of our society. We are one of the few developed nations actually to try to meet that. However, we have got to make sure that the money spent works. It cannot be based upon return to the United Kingdom, although we must make sure it is value for money. Money spent unwisely is, in some respects, money lost. It should look at issues around poverty but should also begin to question the notion of how we address the wider global climate change and look at some of the wider issues that rest underneath that. I am proud that we managed to commit that fund. However, I want to make sure that it works for everybody here at home, to make sure that there is support among those who seek to continue the spending, so that it does not get undermined by people saying, “Why are we spending money on foreign people doing foreign things?” We are all part of a global community, and I think we should be able to recognise that.
A number of noble Lords touched on the north, but my noble friend Lord Kirkhope in particular touched on devolution. We often think about devolution within the nations of this United Kingdom but in truth—he is absolutely right in flagging this up—the question is: how does it break through to the parts of Great Britain? It is true that we need further investment, and this spending review looks at investing in a new towns schemes, bringing substantial funds into the north to try to bring this about. This cannot be tokenistic, it must come from the ground up, it must be money spent wisely and it needs to be accountable. We need to see value for money—it is not about headlines, it is about making sure that the people themselves experience the benefit.
Returning to the issues raised by my noble friend Lord Kirkhope, I am also aware that that question of mental health is absolutely vital. For too long our health service has seen this as a separate issue to be encountered later—it is not. It is at the heart of so many of the problems experienced by wider communities. A number of noble Lords have raised this matter, and that is why the Government have been willing to commit money directly into the mental health area. Is it enough money? I do not think there could ever be enough money committed into this area, but I hope it is a beginning, to move us in the right direction. I welcome my noble friend’s comments in this regard. It is important that as a community we recognise, as we pull these things together, that nobody should be left behind.
The noble Lord, Lord Tunnicliffe, raised a number of issues, including some put forward by the Labour Party itself. I do not want to be overly political here because each party must decide how it wishes to promote wider ideas. However, I note that some of the aspects appear to be broadly uncosted and unfunded. One of the challenges when you are trying to address wider austerity issues is to make sure your books are balanced and you can deliver what is most important—the sustainability of support. Those very elements are critical to giving confidence that we can deliver against them. I admire each of the aspects of the issues he raised, but they must be sustainable in the way they are delivered. Again, I respect the comments made by the Liberal Democrat Benches, recognising that we cannot spend our way out of a problem. We need to find the right balance in the way we address this. It is not always going to be easy, but I hope that we can find the right dynamic to do it.
If you will forgive me, I will work my way through my notes. The noble Lord, Lord Tunnicliffe, was also asking about the timing—and a number of noble Lords raised this question. Is this a pre-election attempt—a would-be pre-election attempt—to interest the wider community? In truth, I think noble Lords will recognise that 31 October is a watershed moment. Whatever you make of that, there needs to be a recognition that after that point there will need to be a brave new tomorrow. Exactly what that looks like will depend on how we enter that point, but we need to be in a position to look at that in a different fashion—a way of seeing how we can begin to budget. That is why, in looking at the spending review, every attempt was made to ensure that it was as up to date as could be, but it does not replace the Budget, which is yet to come later this year. The OBR will have the full details of that material, allowing for a detailed analysis of how money will be spent, and there will be a greater ability to interrogate that. We recognise that a number of issues have lain dormant as we have tackled Brexit. A number of noble Lords this evening and on other occasions have been very clear that we have, in the past, been guilty of becoming indulgent in regard to Brexit and not looking at what we need to be getting our hands dirty with, which is the issues of the people. This spending review aims to try to achieve that as best we can.
The noble Lord, Lord Livermore, asked a number of very detailed questions, particularly in regard to the lower deciles. He is absolutely right to flag this up, because one of the challenges is that if we cannot address the lower deciles the disparity between the rich and the poor—the very thing that Disraeli was talking about—becomes ever greater. In some respects, we have made progress in looking at the living wage, which has made a difference, but to secure the living wage you have to be in work. More people are in employment, which is important, but not enough people are in employment. We need to make sure that not only those on the living wage but those living and working in poverty are recognised. This will be explored further in the Budget itself, but I take away from the points he made the absolutely critical point: we cannot have people left behind who are getting poorer through no fault of their own, and we need to be very careful to achieve that.
My predecessor, my noble friend Lord Young, asked a number of questions, some related to those of the noble Lord, Lord Livermore. He will know far better than I, I do not doubt, that the majority of DWP spend is annually managed expenditure—AME—and the spending review deals with resource spending, so we will see a slight difference in the way this comes forward. The local housing allowance is part of that AME spending, but this is an important issue and I do not want to lose sight of it. I want to make sure that this is absolutely at the heart of the housing question addressed in the Budget and I will ensure that my right honourable friend the Chancellor does that very thing. It would be short-sighted were we to lose track of what that could mean.
The noble Lord also asked when the next OBR forecast will be. The answer is that I do not know—that was an easy one; good—but the Chancellor will know, and I do not doubt that in due course he will tell me, and I will pass it on that further information if I am blessed by retaining this position.
My noble friend Lady Stroud asked a number of quite difficult questions about health, particularly on how those with disabilities are affected. The spending review included £7 million to expand Jobcentre Plus advisory support in schools for young people with special educational needs, and to extend eligibility for access to work to cover internships for disabled people. I would like to know more about that so I will write to my noble friend—I would like more information to understand that as well. The Government will continue to support the most vulnerable: spending on benefits to support disabled people will be higher in every year to 2023 than it was in 2010, which is not unimportant. As for question of wages, the living wage has risen and that is not to be lightly set aside. The total increase in annual earnings should be higher, by a factor of some significance, than they were in 2016. The lowest earners had the fastest pay rises in the last 20 years, but they have not risen far enough, because they started from a lower point—we cannot lose track of that either.
I shall touch briefly on some of the wider questions in the spending review. Local government spending was raised by a number of Peers, particularly recognising the challenges faced in the settlement for local government. Clearly, there are moneys coming in different areas. There will be a 4.3% core spending power increase. We will see real-terms increases: there will not be just a levelling down in that regard. The extra £1 billion grant for social care, which will affect adults and children, with an additional £500 million, should provide some respite for the budgets of local government. The estimated increase in core spending powers is £2.9 billion, including reference to later consultation of the 2% core council tax referendum threshold and a 2% adult social care precept. That should go some way, again.
On the wider question of housing, and particularly the absence thereof—homelessness—we have put forward £422 million to help reduce homelessness and rough sleeping, including an additional £54 million in 2020-21, a real-terms increase of 13% from 2019-20. Is that enough? I suspect not, but I hope it makes some difference and begins a journey as we try to improve these aspects.
The question of the Foreign and Commonwealth Office was raised by some noble Lords.
Lord Greaves
The Minister might like five seconds’ rest. He has not tackled the point I raised, which is that none of this new money—or extra money, if that is what it is—for local government appears to be coming to ordinary district councils and unitary councils for their ordinary local, street-level, neighbourhood services. In many places these are in a state of potential collapse.
Lord Duncan of Springbank
The noble Lord raises an important issue. We talk about millions and billions, and various other ways of assessing money, but if people in the street and in their homes do not experience the benefit of that, it simply seems to wash over them. I will explore further how that money will arrive in the very council forums he discusses, I will write to him on that basis and put that letter in the Library.
Before I forget, the noble Baroness, Lady Kramer, asked a very technical question. My team simply said that we will have to write to her. If she will allow me, I will write to her on that point and put that letter in the Library.
I am running slightly short of time. I am not trying to short-change anyone, but if I end up leaving anyone out, or they feel they have not had full value, I will happily respond to any points beyond that.
The important points I want to stress, as I try to draw my remarks to a close, will be twofold. One is that the spending review itself is based on the best forecasts available at the time. The question of how they go forward is short-term; it will last for one year but the important thing is that it sets a new direction. We have turned a page. We often use “austerity” as a pejorative term, and for many people it is to live through that, but in truth it is about living within means and spending wisely. From hereon in, we must make sure that the money we spend delivers and that those in receipt of it see the benefit of it. I hope that this spending review will do that very thing. Importantly, going forward, the Budget will also begin to put the flesh on to the wider bones which we have set out here. I hope that will give noble Lords some confidence that the system itself, and the approach we are adopting, has not been jerry-rigged or in any way seeks to undermine what has been going forward.
I know that I have left a number of questions unanswered but I shall not be able to find the questions and answers at this moment. I realise that it is now slightly late and that some of your Lordships, like me, may be a little wearier than we would have been otherwise. If noble Lords will forgive me, on that basis—if I have left anything out, please come back to me and I will respond formally—I shall sit down and let your Lordships all go home.
Social Rented Housing: Construction
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Lord Greaves
To ask Her Majesty’s Government, in the light of the comments by the Secretary of State for Communities and Local Government on 22 October about investment in housing, whether they intend to finance an increase in house building by councils and housing associations through increased borrowing; and if so, how many additional houses they intend should be built within the next five years.
Lord Greaves (LD)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and remind the House of my interest as a district councillor.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government and Northern Ireland Office (Lord Bourne of Aberystwyth) (Con)
My Lords, we are keen for local authorities and other social landlords to build more homes. That is why we have recently announced an additional £2 billion increase in the affordable homes programme to more than £9 billion for affordable housing, including social rents. We have also provided rental certainty for social housing from 2020, which will enable social landlords to plan their homebuilding programmes more effectively. Nevertheless, we continue to be open to dialogue with our local authority partners about any constraints holding them back.
Lord Greaves
My Lords, at the weekend the Communities Secretary said that the Government should borrow a lot more money in order to build between 275,000 and 300,000 houses a year in England alone. Since then, the Chancellor said in reply to my right honourable friend Vince Cable in the House of Commons that this was not government policy. Do we still have collective Cabinet responsibility in this country, or do we have a system in which Cabinet Ministers simply debate with one another in public?
Lord Bourne of Aberystwyth
My Lords, I remind the House of the commitment of the Government to build 1 million more new homes by 2020 and an additional half a million by 2022. In pursuance of that, we look at the borrowing capacity of local authorities. They currently have £3.6 billon of housing revenue account headroom available. We increased the borrowing capacity by £300 million in 2013, of which only £144 million has been taken up. As I have said, we remain open to discussing this matter and indeed do so with our local authority partners.
District Councils
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Lord Greaves
That this House takes note of the future availability of resources for the provision of District Council services in two-tier areas.
Lord Greaves (LD)
My Lords, in moving this Motion, I should first remind the House of my registered interest as deputy leader of Pendle Borough Council. This Motion is about district councils—the 201 non-metropolitan or shire districts that exist in areas where there are also county councils, in two-tier areas. Shire districts have become the Cinderellas of local government, in many ways the forgotten ranks, or the poor bloody infantry, yet they are vitally important as the foundation of local democracy in their areas. According to the District Councils’ Network, they deliver 86 out of 137 essential local government services to more than 22 million people, 40% of the population of England. They cover 68% of the country by area and represent the diversity of England, ranging from former county boroughs and urban areas of acute deprivation to attractive and prosperous county towns, university towns and cities, coastal towns, small towns and villages and much of the richness and diversity of the English countryside. They are a kaleidoscope of old and new communities, rich and poor, growing and stagnant, towns and countryside and suburbs and hamlets, and include much of the English coast.
Districts collect council tax on behalf of themselves, the counties and the other precepting authorities yet, for every pound they keep for themselves, more than £5.50 goes to the county councils. So in that sense they are the poor relations. Yet when people refer to “the council” it is usually the district, borough or city council that they are thinking of—whatever they call themselves. It is much more local at that level; it is the town hall where people are more likely to know, see and hear from their councillors. The district provides many of the most local services, which are now becoming known as “neighbourhood services”. In my view, they could do more; it is time for a devolution of powers and services from counties to districts, where the districts can do it more locally and better.
District council services include refuse collection and recycling; local leisure facilities; parks and open spaces; street cleansing; town centres; planning, development and regeneration; environmental health; licensing; support for local advice services; community safety; anti-social behaviour, and much more. It is at the local level where issues are dealt with that really matter to people in their street, town and community, yet when it comes to finance, district councils have been in the front line of cuts in government funding and in their ability to raise money locally. The District Councils’ Network reports that, based on the 2017-18 settlement data from the Department for Communities and Local Government, 146 out of 201 district councils—that is 72%—will face a negative revenue support grant position by 2019; that is, the districts will be sending support grant to central government.
This year, the core spending power of shire districts is being cut by over 5%. The settlement data on core spending power shows that districts are hit far harder than other categories of council. Other councils show increases in the core spending up to 2019-20, but for districts this year, the figure is minus 5%, then minus 4% and then minus 1%. That is unsustainable and cannot go on.
The Government will say that the new homes bonus has come along to rescue the situation. This was introduced in 2011 and provided councils with a payment for each new house occupied, equal to its council tax, in each year for six years. In two-tier areas, 80% went to the districts. The bonus was funded by top-slicing the total local government grant settlement—it was not new money—and helped to offset the cuts in districts’ grants. However, there were unintended consequences—notably a large shift of funding from northern regions to London, the south-east, the south-west and the east of England. That is a different issue from this debate as it affects all councils, but it is an important one. This year the funding has been top-sliced again to provide extra money for social care, and in two-tier areas that has meant moving money from districts to the social care authorities—that is, the counties. It is being paid only for five years instead of six, and from 2018-19 it will be paid only for four years.
There is a new threshold of 0.4% of the housing stock. If your area has not built more than 0.4% of its housing stock as new housing in a year, no new homes bonus at all will be paid for that year. That is already affecting a lot of districts and is likely to affect more. This threshold removed over £70 million of spending from district councils this year, and the threat is that this will get worse in the future. As an example, in my own authority of Pendle, the year-on budget for paying for services is being cut by around half in real terms between 2010 and 2020. Government support is already down by about 60%. The budget plans for the next three years involve a cut of £4 million on a net budget of £13 million—a gross budget of £23 million. We have already cut £7 million since 2010 and the position is devastating. This is all being forced on these councils by government policies, changes to government support, financing systems and the council tax cap. This is not a time to discuss national government policy but simply to report the effect of it on a council such as this.
So far, like most districts in the country, we have coped in a fairly miraculous way. However, staffing has been stripped to a skeleton service and there is a high level of stress among staff working three or four days a week but doing the same amount of work they did when they were working five. The number of people in offices has been reduced from, say, five to three—again, trying to do the same amount of work. In our case, we have offloaded services to town and parish councils and voluntary groups as best we could. But now, like many districts, we are down to the bone. Basic neighbourhood services are at risk: services such as refuse and recycling, the maintenance of parks and open spaces, street-sweeping, the ability to go and remove litter—all that kind of thing. There is the threat of closing a swimming pool and a sports centre and removing the grant to the CAB.
Burnley, next door to us in East Lancashire, forecasts that £3.8 million has to be cut from the budget in the next three years. Harrogate, which is just over the border, over the hills in Yorkshire, is now in a position where there will be no direct grant at all from the Government from next year. It says that there is acute pressure on non-statutory services, pressure to close a swimming pool and reduce the quality of parks and gardens. When the quality of gardens in Harrogate is reduced, something is seriously wrong.
Guildford’s current shortfall is manageable but it is having to pick up the tab as Surrey County Council withdraws from funding local services and Guildford has to take them on. I have a quote from a colleague in New Forest District Council—so in the south of England:
“I would say that the New Forest District Council has been forced into nearly a decade of ‘managed decline’ in which services have been reduced or stopped completely. We are nearing the point when all the authority does is collect household waste and determine planning applications. It is a distressing state of affairs for all of us who value public services”.
On Colchester:
“With Colchester’s rate support grant due to go negative next year to the tune of £400,000 having come down from over £12 million we have had to make a lot of savings”.
The council wants to build council houses but due to the cap on HRA—housing revenue account—borrowing,
“we had to scrap plans to build 50 Council Houses”.
There is a huge tale of woe from South Cambridgeshire District Council, which reports that it cannot get suitable and experienced planning officers—there is a chronic shortage—and it is failing to carry out its proper duties there. It says:
“We no longer have a designated conservation officer, tree officers, environmental officer, economic development officer … or community support officer. Consequently we lack strategies which we once had, e.g. climate change mitigation, economic development”.
It points out that the sheltered housing wardens who visit people in their homes have been removed and,
“replaced by estate managers who just look after the fabric of the schemes”.
Inevitably, that results in more bed-blocking.
The Association for Public Service Excellence—APSE—reports that spending on neighbourhood services across local government has fallen by more than £3 billion over the last five years. Cuts in funding and wide variations between authorities in funding services are,
“changing the very nature of local government”.
Its excellent report in April, Redefining Neighbourhoods: A Future Beyond Austerity?, which bangs the drum for neighbourhood services, says that the total expenditure in the period it covers fell by 13%; and in the most deprived fifth, environmental and regulatory services are at minus 13%, while the least deprived fifth of local government increased by 4%. Expenditure on planning and development services in the most deprived fifth is down by 42%, and in the least deprived areas it is up by 2%. It says:
“Innovation will not solve the funding crisis”,
and that the answer to the social care funding crisis is not to transfer money from other vital services, especially those at local level that have a huge prevention effect. It says:
“This analysis provides compelling evidence the time has come for a robust defence of neighbourhood services”.
Of course, district councils are the places where neighbourhood services are most important. Do the Government agree with that?
The Institute for Government, in a report which is due to be published in about 35 minutes, makes similar points, and points out that spending on local neighbourhood services has fallen by around a quarter since 2009-10. Spending on waste collection is down 18%; on food safety it is down 20%; on open spaces it is down 23%; on culture and heritage it is down 26%; and on sports and recreation it is down 34%. The very fabric of local services is being eroded and people at national level seem to be blind to what is going on.
The King’s Fund report, The District Council Contribution to Public Health, points out that every £1 invested by district councils in preventive services can save the wider public sector up to £70. There is a suggestion that there should be a 2% prevention precept for district councils to match the social care precept for county councils, which of course in county areas does not raise as much as it does in unitary areas because the district part of the precept is not included in that.
Then there is economic growth, which the Government will tell us is the answer to all the problems. It is what we all want to see. District councils are the key to local growth, yet economic development powers are discretionary and little support is provided by the Government at this level. Districts are often effectively excluded from the system for distributing government funding via local economic partnerships. In Lancashire, the local economic partnership has two representatives out of 10 from the 12 districts on the county-wide LEP. The districts are marginalised, yet in areas with strong districts, such as Lancashire, it is they that provide local knowledge, initiatives and drive.
Therefore, I call on the Government to recognise that, at the very local level in which the districts are involved, if they want to build new council houses, unblock the beds, keep the streets clean, help people to live fitter and healthier lives, keep our food safe and have decently maintained local communities, the time has come to look at districts and to treat them better. The pressure is building. It is almost at breaking point and I do not think that people will accept the situation for much longer. Will the Government please respond?
Lord Greaves
My Lords, I am grateful to the Minister for his reply, and to everybody who took part in the debate. I was a bit disappointed that more people did not take part, as I thought that lots of Peers would come from district areas and would be lobbied by their local councils. Perhaps we need to organise that a bit better.
The noble Lord, Lord Beecham, suggested that I should apologise for things that happened during the coalition. Whether or not any apologies are due, I am not sure that I am the right person to ask.
I am grateful to my noble friends Lady Maddock and Lord Shipley for talking about housing, which I had deliberately left to them.
I was disappointed that the Minister did not respond on the proposal for a 2% prevention precept for districts. I just want to say briefly why it is a fair thing to do. In unitary areas—London boroughs, mets and unitaries—the 2% applies to the whole of the council tax levied by the council. In shire areas, it applies only to that proportion of the council tax that comes from the county precept; it does not apply to the proportion of the council tax—10% or 15%, whatever it is—levied by the district. That means that people in shire areas are paying less 2% precept, in a sense, than people in unitaries, because they are paying it only on the proportion that goes to the county and not on the proportion that goes to the district. Therefore, it is perfectly reasonable—even though I would be one person who would have to pay a bit more—that in shire areas, two-tier areas, the district ought to be able to pick up their share of the 2% and apply it to preventive measures. Having said that, in my own authority, the total would be less than £50,000 on 2%, not a huge amount of money and not a great pot of gold. But it would be useful for districts to be able to do that. It is not an additional imposition on council tax payers in district areas compared with the rest of the country. That is an important point. Perhaps the Minister will go away and think about it, and it is something that he could write about.
The Minister seems to be getting a bit obsessed with Pendle—I do not know why. I made it quite clear that, in so far as I talked about Pendle in my speech, I was just using it as an example of a type of area. I talked about lots of other areas, too. However, if the Minister is really so interested in Pendle, perhaps he would like to come and see for himself and talk about some of our problems, and we can explain to him what they are. If he would like to do that, I would very happily, together with colleagues in east Lancashire, across the councils, organise a meeting for him with three or four east Lancashire districts, which all have the same problems. We could explain to him why, probably in four years’ time, the contribution of the new homes bonus in some or all of those districts will be zero. No matter what we do, given our resources, we are probably not going to meet the conditions that the Government are laying down for the number of new houses that would then have to be built. I issue that invitation publicly.
It only remains to me to move the Motion and thank everybody again for taking part in the debate—although I am a little disappointed that the Minister gave a general reply about local government finance and did not focus on specific district issues, in particular on neighbourhood services. They are becoming more and more a matter of concern and the subject of members’ reports, and they are coming up to a crisis point in many areas. Having said that, I promise that the debates will continue.
Local Housing Need
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Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord very much indeed for that contribution. I reiterate the point he quite rightly made that this is about cost, but we must also have regard to quality. He refers quite rightly to the great growth in the housing needs of people aged 65 and over, not least because people, thankfully, are living longer. Their needs will be very different as they age. He will recall that on the then Neighbourhood Planning Bill there was discussion on this, prompted initially by the noble Baroness, Lady Greengross, I think. As a result of discussions on that, the Government were keen to ensure that we placed an obligation in the National Planning Policy Framework relating to elderly housing, which has been taken forward. It is very much at the forefront of our thinking and therefore places an obligation on local authorities to make provision for that age group when they present their plan.
Lord Greaves (LD)
My Lords, the Government’s mantra is that the housing market is bust—they say broken, I say bust. The truth is that the local planning system is bust, very largely due to the cost and complexity the Minister referred to of producing local plans. He is really blaming local authorities for this—I declare my interest as a member of a district council in Lancashire—but all the councils are doing in producing these local plans, using expensive consultants and producing incredibly complex documents, is following instructions from above and doing what they are told to do, and how they are told to do it, by the Government.
The Statement says:
“We are not attempting to micromanage local development … It will be up to local authorities to apply these estimates in their own areas—we are not dictating targets from on high”,
unlike the old regional spatial strategies, but this is exactly what the coalition Government said when they introduced the present system six or seven years ago. It has not worked out like that. The truth is that the numbers that come out are effectively dictated from on high by the rules and regulations laid down. It seems this will be just the same.
Will the Minister give a bit more detail about the relationship between this new system when it comes in, which presumably will be next spring some time, and the existing local plans that have been adopted and the local plans and core strategies going through the system in different local authorities? The Minister said that if a local plan is in existence before 1 April 2018 it will not be subject to these new numbers, but will the new numbers still apply when people apply for planning permission for new developments over and above the numbers in the adopted core strategy or the adopted local plan? What about areas where numbers would go down when local people and perhaps the local authority quite reasonably expect to be able to resist applications for planning permission on the basis of new numbers, even if numbers have been set out or land allocated in their local plan?
Lord Bourne of Aberystwyth
My Lords, I thank the noble Lord, Lord Greaves, very much for that and give him this assurance: I certainly was not blaming local authorities. I went very much out of my way to say that action was being taken on the system as it was and that it was intra vires their powers. As I have been at pains to say, successive Governments have brought us to the position that the market is broken—bust, as they apparently say in Pendle. It is right to say we are going for a uniform approach, as he indicated, but issues about where the housing goes and the type of housing is a matter for the local authority. We seek to set out a framework here and we are of course consulting on it.
Regarding the dates for when this comes in, if there is an existing plan as of now or an existing plan goes in before 1 April 2018, or later if the national planning policy changes later than that date, that plan is the valid one until it runs its life. New ones will come in and take over from the old plans.
In relation to the issue of some authorities wanting to be or being in a position where, on the formula, they will require less housing, if they want to go further than that then of course the Government will be delighted, but they will need to justify that to the Planning Inspectorate on examination. Once again, that will be an independent process. That is the essence of what we are consulting upon but, as I say, we are very much open to this discussion, which will end on 9 November.