Local Government Finance (England)

Debate between Luke Hall and Adam Afriyie

Wednesday 10th February 2021 Commons Chamber

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

May I begin, like so many Members, by expressing my huge appreciation for the incredible work that councils across the country have been doing to lead the response to the pandemic? Social workers, refuse collectors, carers, teachers, council officers and so many more have been on the frontline of our response to covid-19, and they have been unwavering in their determination to deliver the essential services we all rely on every day. That is why this Government have backed councils with the funding and resources they need to support our communities, businesses and local economies in this local government finance settlement.

This settlement delivers a 4.6% cash-terms increase in core spending power next year, an increase in real terms, guaranteeing that no council in England will have less funding available than last year. That comes on top of the settlement for this current financial year, which was a 4.5% rise in core spending power. That in itself was the best settlement for a decade and it was supported by every Member of this House. Alongside this settlement, in recognition of the fact that the pandemic is not yet over, we are providing a further at least £3 billion in covid-19 funding next year to support councils’ income and expenditure. That takes the total support already committed to covid-19 income and expenditure pressures to more than £11 billion.

May I thank a number of my hon. Friends for their contributions today? My hon. Friends the Members for South East Cornwall (Mrs Murray) and for St Austell and Newquay (Steve Double) both highlighted the increase in resource going to Cornwall Council, with that 4.7% rise in core spending power in cash terms. My hon. Friend the Member for Burnley (Antony Higginbotham) welcomed the rise in core spending power. The hon. Member for Blackburn (Kate Hollern) questioned how much was going to Burnley; I can tell him that it is a 2.6% rise, alongside the 5.3% rise going to Lancashire County Council. My hon. Friend the Member for Darlington (Peter Gibson) welcomed the extra support and swift provision of funds for Darlington Borough Council, with a 4.8% rise in core spending allowing, as he described, the council to deliver for local residents. May I put on record my thanks to Darlington Borough Council for the excellent work it is doing to restore the council to its rightful place?

I was slightly confused by the contribution from the hon. Member for Salford and Eccles (Rebecca Long Bailey) when she said that there was no commitment in this settlement to increase funding in Salford. The opposite is true; in the current financial year there has been a 7.8% increase in core spending power; and the settlement we have published and are debating today sees an increase of 4.7% in core spending power for her council. I am afraid that she is incorrect in her statements.

A number of Members today raised covid support for their councils and talked about what they saw as the gap in funding between what councils spend and what we are providing them with. Councils’ self-reported figures project that covid cost pressures this year will be £6.9 billion. We have already allocated £8 billion to councils, which is over £1 billion more than they are spending in responding to the pandemic. On top of that, we have provided a business rates holiday worth around £10 billion to local retail, hospitality and leisure industries. We have given councils over £17 billion to provide grants to thousands of businesses up and down our country, and they have done an incredible job in distributing those efficiently and speedily to ensure that businesses are getting the support they need. We have also introduced a sales, fees and charges scheme to help councils manage losses in income. We are backing local government all the way with the necessary funding, both now and into the future.

One of the recurring themes of the debate was the issue of social care, which was raised by the hon. Member for Wirral West (Margaret Greenwood), by the Chairman of the Housing, Communities and Local Government Committee, the hon. Member for Sheffield South East (Mr Betts), and by my hon. Friend the Member for Milton Keynes North (Ben Everitt). This settlement helps to support the most vulnerable people in our society, especially in social care. We are providing access to an additional £1 billion in funding for adult social care in the coming financial year, which includes £300 million in grant funding for both adult and children’s social care. We are also providing an additional adult social care tax flexibility of 3% to give councils the tools to make the best decisions for their residents, giving councils access to an extra £790 million. That is all on top of the £1 billion social care grant announced last year, which is being maintained in line with our manifesto commitment. We have responded to the pressures facing councils to ensure that they have the resources they need to provide the best quality care for residents across the country.

A number of Members raised the point about the varying ability to raise resources to pay for the increasing costs of social care, and it is a very valid point. It is indisputable. It is a fact that some local authorities can raise more than others, but I am afraid that those Members have completely missed a key component of this settlement, which is that we have chosen to help councils to bridge that gap through equalisation. We are taking specific action to level the playing field between different councils in different circumstances. Through this settlement, we will redistribute £390 million of social care grant, recognising this exact point that some councils can raise more than others through locally raised tax.

We make this commitment of £240 million this year, on top of the £150 million that is continuing from last year, so that funding is distributed fairly to those who need it most. Liverpool is receiving an extra £10.4 million, Manchester £9.2 million and Sheffield £6.9 million. We are determined to level up every part of the country using all the tools we have, and this is a clear, concrete example of us doing just that. The hon. Member for Kingston upon Hull North (Dame Diana Johnson) made this very point—she talked about the fact that it is more difficult to raise funds in Hull, but if she looks at the detail of the settlement, she will see that Hull is receiving £5.2 million through this equalisation mechanism to support its delivery of services and to ensure that people in her constituency receive access to first-class care.

A number of Members also raised points about council tax. Of course it is right that individual local authorities should make decisions on council tax levels themselves.

[Adam Afriyie]

Could I just ask the Minister to keep an open mind towards the idea of some local authorities being able to have another, higher council tax band—band I? This would be raised locally, which I hope local people would be comfortable with, rather than being reliant on central Government.

[Luke Hall]

I thank my hon. Friend for his question. I will come on to talk about funding reform in a minute and perhaps try to address that point.

Importantly, we are giving councils the flexibility to defer rises using the adult social care precept to next year if they think that local circumstances dictate that that should be the case. That is of course a decision for them. Vitally, as my hon. Friend the Member for Waveney (Peter Aldous) pointed out, we are providing councils with up to £670 million of new funding to help them to reduce council tax bills for those who are least able to pay.

The referendum threshold that we have set strikes the right balance between allowing councils to raise income to deliver the services they need and making sure that residents have the final say over any excessive council tax rises. We trust councils to make the right decisions on council tax. I am afraid the Labour party cannot even persuade its own councils of that—they are constantly writing to the Secretary of State and me to ask for the caps to be removed completely. The long-standing policy of the Labour group on the LGA is to see the caps scrapped altogether.

My hon. Friend the Member for North Norfolk (Duncan Baker) made the fair point, raised by councils with particularly seasonal economies during the consultation on the settlement, that they could have lost out because of the proposed structure of the sales, fees and charges scheme for the first quarter of next year, as it might not best account for the impacts of the pandemic on their income from April through to the end of June because usually they receive a large proportion of their annual income in that period, perhaps because of car parking and their having seasonal or coastal economies. We have listened to that point, and I thank my hon. Friend for raising it and the many councils that raised it during the consultation. We will allow them to use their seasonal profile so that they are able to claim a larger proportion of their losses in the April to June quarter of this coming financial year and are therefore better protected from the income losses because of covid-19. That is one of the many ways in which we are trying to support councils as we ensure that they have the resources they need to deliver first-class funding services.

A number of Members, including my hon. Friends the Members for Milton Keynes North, for Sedgefield (Paul Howell), for Waveney and for Windsor (Adam Afriyie), raised the possibility of future funding reform. I can confirm to them that we on the Government Benches still believe that we need an updated and fairer method of distributing funds among local government. This year, of course, we have had to concentrate on supporting councils through the pandemic—we did not think it was right to use this time to engage in detailed conversation about local government finance reform—but I absolutely reassure them that we are committed to the principles of reform and to making sure that we put money where it is needed most. Once we get through this pandemic, we will return to the priorities for financial reform. I am happy to have conversations with councils such as Windsor and others and to listen to their concerns if they have tried, historically, to do the right thing by keeping taxes low and want to understand their options for the future.

My hon. Friend the Member for Sedgefield talked about the fact that he wants to make sure that in any funding reform, rural funding is received in areas that have a large urban population centre but rural fringes. He is right to raise that issue and I am happy to discuss it with him.

Several colleagues raised rural services, and they are right that we have increased the rural services delivery grant this year from £81 million to £85 million, which its highest ever level. We absolutely recognise that there are cost pressures—whether that is the need to drive long distances for refuse collection or to service more hubs across a larger geographic area—on the delivery of services in rural communities.

My hon. Friend the Member for Isle of Wight (Bob Seely) raised the individual circumstances that his constituents face. I am delighted that we are finding a way forward to work with his local authority to ensure that it can help to build the evidence case on the relative challenges facing the Island because of its separation from the mainland, with a particular focus on the impact of the local government finance system.

We are backing local government all the way with the necessary funding, both now and into the future, with a 4.6% rise in core spending power, £3 billion to help councils fight and recover from covid-19 and flexibility for councils to raise revenue, while also giving people the final say on excessive council tax increases. From our future high streets fund to our towns fund, the troubled families programme and increased funding to tackle domestic abuse and support rough sleepers and get them off the streets, we are backing councils, which are at the forefront of our shared recovery. I hope Members from all parties recognise the critical importance of passing the settlement and giving local government the support and confidence they need to plan for the brighter days ahead. I commend the settlement to the House.

Question put and agreed to.

Resolved,

That the Local Government Finance Report (England) 2021-22 (HC 1200), which was laid before this House on 4 February, be approved.

Resolved,

That the Referendums relating to Council Tax Increases (Alternative Notional Amounts) (England) Report 2021-22 (HC 1201), which was laid before this House on 4 February, be approved.—(Michael Tomlinson.)

Resolved,

That the Referendums relating to Council Tax Increases (Principles) (England) Report 2021-22 (HC 1202), which was laid before this House on 4 February, be approved.—(Michael Tomlinson.)