Local Government Funding: North-East

Marcus Jones Excerpts

Tuesday 1st March 2016 Westminster Hall

[Jenny Chapman (Darlington) (Lab)]

I beg to move,

That this House has considered local government funding in the North East.

It is a pleasure to serve again under your chairmanship, Sir David. I am grateful for the opportunity to have this debate, which I applied for so that I could set out the impact of the local government funding settlement on my constituency and give colleagues from across the north-east the opportunity to make clear to the Minister the consequences for their constituencies of the decisions that he and his colleagues have made.

I welcome the Minister—I am glad that he is here to listen—but I am disappointed. I think it would have been appropriate to have the northern powerhouse Minister, the hon. Member for Stockton South (James Wharton) here, given his stake in the region. His constituency lies in the north-east so his constituents will also be subject to the effects of the Government’s decisions. It would have been good to have the opportunity to tell him how we feel. However, I notice that the Minister is making notes and I am sure that he is all ears and will take back the clear message that we will be sending via him.

May I just tell the Minister a little about the north-east? If his colleague was here I would obviously not need to do this. We are very proud of the north-east. We love the north-east.

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

My mum is from the north-east.

[Jenny Chapman]

Well, my mum is from Kent but I know bugger all about it. [Laughter.]

I want to convey to the Minister that we are incredibly proud of our region. Everyone who lives in the north-east is proud of it. We have a strong industrial heritage and we have an exciting future ahead of us. We are hard workers. We have a beautiful landscape and a wonderful coastline. We have vibrant cities and world heritage sites. We are keen to see the region progress and grow as we know it can, but that needs the support of a Government who understand the north-east, and I do not think that that is what we have.

Alongside all those wonderful things in the north, we have some challenges. I want to say a few things about ageing, and I know that the Minister might also want to refer to it in his response. Life expectancy is lower for men and women in the north-east than anywhere else in the country. For boys born between 2012 and 2014, life expectancy at birth was highest in the south-east and lowest in the north-east. For girls, it is the same: life expectancy is the highest in London, where they will live until they are 84, and the lowest in the north-east, where they will live only until 81. Men in the north-east who get to 65 can expect to live to 78. My dad did not get to 65: he grew up in South Bank in Middlesbrough—somewhere the Minister’s boss knows well, I think—and he died at 48 from heart disease. Lifestyle absolutely was a factor. For women, life expectancy at 65 is highest in London—they will live another 22 years there—and lowest in the north-east, where they will live only another 20 years.

The strategic review of health inequalities in England post-2010—the Marmot review—concluded that health inequalities stem from avoidable inequalities of income, education and employment, and that they are not inevitable and can be reduced. I think that local authorities have a key role to play in that reduction.

Let me give some examples. According to IPPR North, transport spending in the north-east is £5 per head compared with £2,600 per head in London— 520 times less. There are 33 projects in the pipeline for London and the south-east compared with just three in the north-east. The Government need to look at how they evaluate projects and decide where to invest. Our transport infrastructure, including the quality of rolling stock, in the north-east is clearly not good enough compared with that in other parts of the country.

According to the latest Office for National Statistics report on unemployment by region, it is highest in the north-east at 8.7 %. The largest decrease in UK workforce jobs in the last three months of 2015 was in our region—we lost 26,000 jobs. According to the Department for Education’s “NEET Quarterly Brief”, the proportion of 16 to 24-year-olds not in education, employment or training is highest in the north-east, at 20.1%—that is 59,000 young people. According to the Joseph Rowntree Foundation, average wealth in property and assets is lowest in the north-east, where it is half that in the south-east, and financial wealth is four times greater in the south-east. Those are real issues of inequality and opportunity that we think that local authorities are well placed to assist in addressing.

According to the Department for Education, the north-east and the north-west jointly have the highest rate of looked-after children, at 82 per 100,000. The lowest rate is in outer London, the east and the south-east, so we bear the brunt of that burden too. According to the 2011 census, the day-to-day activities of 22% of people in the north-east are limited by a long-term health problem or disability, compared with 18% for England and Wales—remove Wales and the figure is probably even lower. The census also shows that 11% of people in the north-east provide unpaid care for someone with an illness or a disability—a figure that is higher than the national average—and that the north-east has the highest proportion of socially rented accommodation, at 15%.

The point I am trying to make is about need. The Government do not take sufficient account of the varying degrees of need across the country, and councils serving communities with the highest levels of need are not being supported.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)]

As always, it is a pleasure to serve under your chairmanship, Sir David. I congratulate the hon. Member for Darlington (Jenny Chapman) on securing the debate. It is my pleasure to be able to respond and I thank hon. Members for their valuable contributions.

I recognise that councils throughout the country have been fully dedicated to improving local services in a very challenging environment. It was absolutely right that we listened to local authorities and to Members of this House during the local government finance settlement consultation. We have done our utmost to ensure that the settlement is right and fair for all. The distribution of funding has recently been discussed at length in this House, alongside the overall level of resources available to local government. The hon. Lady called today’s debate to discuss local government funding for the north-east, but it is important to place that in the national context of what the Government are working to achieve.

Local authorities account for a quarter of all public spending, so it has always been clear that they would have to play their part in reducing what was the largest deficit in post-war history. Last autumn, the Government’s spending review set out clearly how savings must be made over this Parliament to ensure that we finish the job of eliminating the remaining deficit and what that will mean in terms of overall council funding. In real terms, councils will be required to save 6.7% over the spending review period. At the 2010 spending review, a reduction of 14% was announced, so the pace of spending reductions has slowed significantly for this Parliament, as the Institute for Fiscal Studies has acknowledged.

In cash terms, when we look at the overall core resources available to local government in the finance settlement, core spending power is virtually unchanged over the spending review period. Councils will receive £44.5 billion in 2015-16 and £44.3 billion in 2019-20. Furthermore, we have tried to be as fair in regard to distribution as possible, making reasonable assumptions that understate the maximum resources available to councils. For example, in line with the Office for Budget Responsibility, we assume that council tax will increase with inflation, not by the referendum threshold of 2%. If we had assumed the maximum figure, more than a quarter of a billion pounds extra in resources would have been available. We have been clear: yes, further savings are required, and councils have recognised that, but we have taken important steps to help councils make those savings.

[Mr Kevan Jones]

I do not know what colour the sky is in the Minister’s world. What is fair about north-east councils—Durham, Newcastle and others in the figures I read out—having 4% cuts in their budgets this year when Surrey has less than a 1% cut and Wokingham’s cut is even less than that? How can that be fair, given the demands on services faced by Durham compared with places such as Surrey? Is it just a coincidence that 85% of the councils who gain from his transitional arrangements happen to have Tory MPs?

[Mr Marcus Jones]

The average spending power per dwelling for the 10% most deprived authorities is about 23% more than for the 10% least deprived authorities in this coming year. Opposition Members have mentioned several times an assertion about the transitional grant. The grant was based firmly on the local government finance settlement, the consultation we undertook and the responses from the consultation. There were a significant number of responses and a call for some sort of transitional grant to support those areas that had lost the most central Government grant compared with the amount expected based on the old redistribution formula.

[Anna Turley]

The Minister has been generous with his time, but what does he say to his own MPs who stood up in the Chamber and admitted that they got the money because they threatened to revolt?

[Mr Marcus Jones]

There are MPs from my party who represent very wealthy areas and others who represent less well-off areas. I say to the hon. Member for North Durham (Mr Jones) that not all of our Members are from Surrey; my party would not have been able to win a general election based on a cohort of MPs from Surrey. MPs in my party come from a wide swathe of the country. The transitional grant was based not on where MPs come from but purely on the response to the local government settlement. It is intended purely to mitigate the most significant changes in funding for the authorities that had the greatest proportion of loss from the revenue support grant.

[Ian Mearns]

Does the Minister accept that even though the revenue support grant is due to be withdrawn completely, in the meantime the Government have written out any concept of addressing need? Local authorities such as mine in the north-east of England do not have the capacity to raise taxes locally because many of the properties in our area are in the lower bands, so the band D national median is meaningless.

[Mr Marcus Jones]

That is why generally, as I said, the areas that have been referred to in the debate that are receiving transitional grant had a higher reduction in revenue support grant than areas such as that represented by the hon. Gentleman. He and a number of his colleagues have taken a dim view of the north-east in relation to its ability to move forward as an economy and create business rate revenue and additional council tax.

To take the constituency of the hon. Member for Hartlepool (Mr Wright), for example, thanks to the business rate retention scheme during 2014-15 there was a 14.6% increase in revenue. To pick up on a point he made, we will move to full business rate retention in 2020, but before that there will be a consultation on how we deal with redistribution. We understand and accept that in some places significantly more business rates are collected than in others.

The approach we have taken in this historic settlement is aimed at supporting those areas with the greatest pressures and providing councils with the certainty they need as we move towards a system of greater devolution. The settlement allocates funding on the basis of the core resources available to local authorities, taking into account councils’ business rates and council tax as well as their revenue support grant. It ensures that councils that deliver the same set of services will receive the same changes in core funding for those services.

[Mr Kevan Jones]

Will the Minister give way?

[Mr Marcus Jones]

I will in a moment. That is fair and that fact was recognised by Middlesbrough Council in its response to the consultation on the settlement.

We have also provided councils with unprecedented levels of certainty. Our historic offer of a four-year settlement answers calls from councils to allow them to plan over the long term, giving them the certainty required to create greater efficiencies. That has been welcomed by councils across the country, including those in the north-east such as Durham County Council and Newcastle City Council.

[Mr Kevan Jones]

Will the Minister give way?

[Mr Marcus Jones]

I have already given way; I am going to make some progress.

Councils now have the opportunity to smooth their path over four years, using reserves where necessary and if they so wish. Even so, we have not made any assumptions that councils will use reserves in any published figures. Despite giving this opportunity, we have made no assumptions that councils will use their reserves in any published figures.

The settlement also responds to the clear call from all tiers of local Government and from many of my colleagues in the House to recognise the priority and increasing cost of caring for our elderly population. As such, we have made up to £3.5 billion available by 2019-20 for adult social care through a dedicated social care precept of up to 2% a year and the improved better care fund. That is significantly more than the amount asked for by the Local Government Association and the Association of Directors of Adult Social Services. We have proposed that the additional better care fund money should be distributed to complement the new council tax flexibility, so more will go councils that can raise the least from that flexibility. We will, however, consult colleagues in local government on that in due course.

We have also prioritised housing. The new homes bonus was due to come to an end, but it has been a useful contributor to the increase in planning permissions being granted. Payments since its introduction in 2011 total just under £3.4 billion, reflecting more than 700,000 new homes and conversions and more than 100,000 empty properties brought back into use.

[Jenny Chapman]

On a point of order, Sir David. Is it not convention in Westminster Hall to allow time for the person who secured the debate to reply? I believe it is.

[Sir David Amess (in the Chair)]

I was rather hoping that there might be at least 30 seconds for the hon. Lady to reply.

[Mr Marcus Jones]

I will certainly do that for the hon. Lady; I intended no discourtesy. Finally, in 2016-17 the core spending power per dwelling in the north-east region is £1,820, which is 3.9% higher than the £1,750 figure for the south-east.