Covid-19: Funding for Local Authorities

Luke Hall Excerpts

Tuesday 24th November 2020 Westminster Hall

[The Minister for Regional Growth and Local Government (Luke Hall)]

It is a pleasure to serve under your chairmanship, Mr Hollobone, and to be back in Westminster Hall after such an absence. It is an important Chamber in which to hold debates such as this one, to raise issues such as local government finance and so on. I am hugely grateful to the hon. Member for Bethnal Green and Bow (Rushanara Ali) for securing the debate and for opening it in such a pragmatic, sensible, level way, which highlighted some of the issues facing local government. I thank her for the tone in which she opened the debate and I thank hon. Members for their contributions. I will do my best to address all the points that have been raised.

First, may I place on the record my thanks to local government? The work that those who serve in local government have done in these extraordinary times has been remarkable. They have risen to help us as a country respond to the incredible challenges we are facing and worked tirelessly to help us through the pandemic. From their incredible work protecting rough sleepers, offering over 90% of them accommodation within just a few days of the start of the pandemic, to the work they have done on testing, alongside NHS staff, to keep our parks, public spaces and schools open, and helping vulnerable people, including victims of domestic abuse, the response has been truly remarkable. I know that if the Secretary of State and the Prime Minister were able to attend, they would put on the record their thanks for the remarkable work of councils, councillors and officers around the country who have done so much to support their communities, their businesses and vulnerable people.

Much of today’s debate has been about the response to the pandemic, so I will start my remarks there. In responding to the pandemic, we have built on what was a good local government finance settlement for this financial year: a 4.4% real-terms rise in core spending power for councils. We were genuinely grateful for the Opposition’s support for that finance settlement and hope to have their support again. Clearly, they will look at the detail carefully when the Chancellor makes his statement tomorrow and when the settlement is published, but we were grateful for the cross-party support this year, which we hope will be forthcoming again.

We have been determined that no local authority should face unmanageable spending pressures because of coronavirus, and we will continue to deliver on that commitment. That is why, following the announcement of the winter plan this week, we have allocated up to £8 billion this financial year to support councils throughout the pandemic. Crucially, that includes £4.6 billion of non-ring-fenced spending so that councils can make decisions at a local level about how that money is spent and how resources should be deployed, because councils know their communities best and are best placed to make those decisions.

A number of hon. Members mentioned the financial returns that we have asked councils to submit throughout the pandemic. I am grateful to councils for doing that so diligently. Our information shows that councils spent £3.6 billion from March through to the end of September on covid-related pressures, so we hope and expect that £4.6 billion of non-ring-fenced money has helped councils with those expenditure pressures.

It is worth putting on the record the other support that local government has received from Departments across Whitehall since the start of the pandemic. That has included: £1.1 billion for the infection control fund, which has helped support adult social care providers to reduce the rate of transmission both in and between care homes, and to support the wider workforce, which has been vital; £300 million of support for councils’ Test and Trace activities; £485 million to support implementation of the national restrictions, which has been extended to the end of the financial year; £91.5 million for councils to ensure that rough sleepers do not return to the streets, as announced in September; £170 million for the winter grant scheme to support families and children; and over £22 billion in grants and reliefs for businesses at this challenging time. We believe that funding package is unprecedented.

Hon. Members commented on what extra financial support will be available now. I reiterate the point made yesterday by the Prime Minister, who confirmed further support for councils as we return to the tiered system of local restrictions with the extension of the contain outbreak management fund for the rest of the year. That will mean a payment from the Department of Health and Social Care to upper-tier local authorities of £4 per person per month in areas with very high restrictions for the rest of the financial year.

Hon. Members made points about the distribution of funding throughout the four tranches of local government finance support since the start of covid. We have distributed non-ring-fenced funding using a covid relative needs formula. It is important to state that the formula accounts for the main drivers of covid-related expenditure. Yes, of course that includes population, but it also includes deprivation, which is crucial, as well as the various cost adjusters for delivering services in different parts of the country. We think that was the right system when considering how to distribute money between councils.

Members also pointed out that it is not only additional covid spending pressure that councils have faced; many have also had to deal with tax and income losses. That is why, alongside the funding we have put into local authorities, we have introduced measures to help them manage the loss of income from tax and transactional services, sales, fees and charges. That is a substantial scheme. It compensates councils for lost income from key services, such as car parks and libraries, which are normally funded through sales, fees and charges but clearly have been largely closed or underused during the pandemic. Alongside that, we have given councils the flexibility to spread their tax losses over multiple years, rather than the usual one year. We have committed to set out further details at the spending review—we do not have too long to wait—on how we will apportion the lost tax income between central and local government. I know that councils are keen for clarity on that point, and it will be provided shortly.

There were a number of representations about the spending review itself. I understand that this is a perfect time for that conversation to happen, and those points have been made. I will answer some of the points specifically, but the representations about spending for local authorities, an increase in core spending power, social care funding and the share of the council tax burden and grant have certainly been heard. Those points were well made.

The hon. Member for Poplar and Limehouse (Apsana Begum) mentioned the one-year spending review and how it would have been more suitable to have a longer-term settlement. I understand that point, but unfortunately we are in a place now where long-term planning is difficult to pursue, so we think it is right to concentrate on the covid-19 response. However, we absolutely share councils’ desire to return to longer-term financial planning. That has been a key ask of councils, and once we are through the pandemic we aim to hold a multi-year spending review settlement.

The hon. Member for Bradford West (Naz Shah) asked a number of questions, which I will try to address. She asked about engagement with regional Mayors. That is a really important point. The Secretary of State and I spoke to all regional Mayors across the country last night. We have an open offer of conversation and continued engagement with them. We also had a webinar with local authorities yesterday, which every leader and chief executive was invited to. Hundreds of councils joined that call, and that engagement is hugely important to us as we progress through this period. We actually continue to have regular webinars and discussions with council leaders across the country, answering their questions on an almost weekly basis, which has been hugely informative.

I hope that I have answered part of the point that the hon. Member for Bradford West raised about the £4 per head in new funding. If she wants more detail on that after tomorrow, I am happy to set it out for her in writing. She asked about lost income and how much of that is being paid out. Most councils have now been informed about the first tranche of payment that is being paid out—millions of pounds. I am happy to share the details with her if that is desirable. She also mentioned public sector pay in local authorities. It is important to note that local authorities, working with unions and other employer bodies, take these decisions externally of Government, but she is absolutely right to put that on the record.

My hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) made sensible and important points about the long-term sustainability of funding and about funding reform. We would have liked to come forward with the fair funding review this year. Clearly, that is not possible in the current circumstances, but we continue to have that conversation. My hon. Friend the Member for Waveney (Peter Aldous) talked about the funding challenges facing counties and made important points about the spending review and the settlements. Those representations have absolutely been heard.

My neighbour, the hon. Member for Bath (Wera Hobhouse), who has understandably left the Chamber, made important points about the specific circumstances facing her local authority, which is unique in a lot of respects. I point her towards the sales, fees and charges scheme, which compensates councils for 75% their losses beyond the first 5% of planned income. I am always happy to meet her to discuss those unique circumstances. She also asked for certainty about leisure centres. The Department for Digital, Culture, Media and Sport will shortly set out more detail about the £100 million scheme for leisure centres. She makes an important point about the importance of those institutions for people’s physical and mental health. She is quite right to raise that.

The hon. Member for Luton South (Rachel Hopkins) talked about the genuinely unique circumstances that face her council. I hope she feels that we are working with her constructively. It is a unique situation and I am always happy to meet her and her council leader to discuss it, if that would be of use. I absolutely recognise the point she raises.

The hon. Member for York Central (Rachael Maskell) also raised the unique circumstances facing her local authority. I know that we are planning to speak soon, and I look forward to addressing the issues then. She also mentioned the spending review and local government pay, which I hope I have covered in my remarks.

The right hon. Member for East Ham (Stephen Timms) raised a number of issues. I join him in putting on the record my thanks to the incredible organisations in his constituency and his local authority for the work they have done on rough sleeping, which I know is a huge challenge. I know how committed they are to that issue and to supporting people. I thank them for the work they have done in the “Everybody In” campaign. He also made passionate points about those with no recourse to public funds. I think we have made changes on that issue during the course of the pandemic, including extending the derogations to ensure that everybody can receive that basic safety net of support, further than the areas it had already been extended to.

The hon. Member for Westmorland and Lonsdale (Tim Farron) talked about some of the excellent work that his council has done, paying out grants and supporting businesses, and I commend it for that work. He also had passionate views about local government reform and the timings. He will be able to make that argument through the process in the right way. I know he feels strongly about the matter.

I want to thank again the hon. Member for Bethnal Green and Bow, who made a number of hugely important points. She talked about targeted funding. I hope she feels that we are doing that through the equalisation we did last year, to ensure that the local authorities affected most by the social care precept are seeking that extra support. I thank her and I am at her disposal, if she needs to talk about that further. I would like once again to thank all local authorities up and down the country. I believe that this unprecedented package of support is supporting those councils and I thank them for their work.