Local Government Funding

Maria Eagle Excerpts

Wednesday 28th March 2018 Commons Chamber

[The Secretary of State for Housing, Communities and Local Government (Sajid Javid)]

I welcome the opportunity to respond to this debate and to set the record straight on the Government’s support for local government and the communities that it serves. First, however, let me take this opportunity to express my condolences to the family and friends of Councillor Clarissa Slade—one of the youngest councillors in the country, who died, sadly, earlier this week.

Every day, dedicated councillors and officers in local government deliver vital services on which we all depend: on that much, the shadow Secretary of State and I agree. I have the highest regard for them. They are, quite simply, at the frontline of our democracy and the foundation on which strong, thriving communities are built. That said, these have been challenging times for local government, although it has been notable how impressively many councils have stepped up to make hard-earned taxpayers’ money go much further—not just protecting services, but often improving them. The fact that satisfaction levels among residents have remained broadly steady is testament to that. However, I recognise, of course, that these hard-won gains have been achieved in a very difficult financial climate.

[Maria Eagle (Garston and Halewood) (Lab)]

What does the right hon. Gentleman have to say to Liverpool City Council, which has lost 64% of its Government funding so far? We have not even reached 2020 yet.

[Sajid Javid]

I hope that the hon. Lady will appreciate what I am about to come on to: an understanding of how we got into this situation and how we can avoid getting back into it. Liverpool City Council is part of the Liverpool city region, which has been getting a lot more money recently—especially for investments, to encourage growth and jobs. If other members of the Liverpool city region, such as Wirral, for example, stopped wasting a quarter of a million pounds every year on some council Pravda, perhaps they would spend money more efficiently.

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[Maria Eagle (Garston and Halewood) (Lab)]

I rise to support the motion in the name of my right hon. Friend the Leader of the Opposition and other right hon. and hon. Friends, in particular the part that suggests that

“councils are reaching a financial breaking point”

and calls on the Government to

“initiate a review into the funding of local government to ensure that the sector has sustainable funding for the long term”.

I am sorry that the Secretary of State is leaving at this point, because I hoped he might listen to what Back Benchers have to say—but apparently not. I think the level of cuts is too great and threatens the very future of local government as we know it.

Two councils cover my constituency of Garston and Halewood. Liverpool has lost 64% of its central Government funding, or £420.5 million in real terms since 2010. At the beginning of the Lib Dem coalition Government—I am sorry the Lib Dems have absented themselves, because they cannot absolve themselves of responsibility for the cuts that have happened and that continue to happen as a consequence of the Government they supported and were in—we lost £350 million from Building Schools for the Future, £127 million from the housing market renewal initiative, and all the money that recognised the levels of deprivation in Liverpool.

Consequently, the council now has 3,000 fewer staff. It has taken out most of its middle management and saved £5 million a year by cutting the performance-related bonuses of its remaining staff. Councillors’ allowances have been frozen since 2010 and special responsibility allowances have been cut by 10%. There remains a £90 million gap to be filled over the current three-year period.

The other authority, Knowsley, is smaller but has been bashed equally hard by the Government. It has lost 45% of its Government funding so far, which is over £100 million. That is £485 for every person in the borough, which is double the England average of a loss of £188. Consequently, the authorities are struggling to meet the requirements they have to support their residents.

The future the authorities face will be even more difficult, because by 2020 Government grant will be cut further and they will have to rely on council tax and business rates. Liverpool has the further disadvantage that 60% of its properties are in band A—the lowest yielding council tax band—and 90% in bands A to C. The money raised by council tax in Liverpool is £72 million below the average UK figure. It can raise only £1.4 million for every 1% increase in council tax.

The council tax base is such that it will never be as easy for a city like Liverpool to do as well as more affluent areas on the basis of council tax and business rates alone. Last year, 72% of Liverpool City Council’s funding came from Government grant and only 11% from council tax. It has to spend more on adult social care than it can raise in council tax. That is the situation it faces. It is doing what it can. It has built almost 11,500 new band D properties since 2010, yielding an extra £13.5 million a year in council tax. It is doing its best to grow the council tax base, but it is difficult.

Knowsley has made particular efforts to grow its local economy to deal with similar issues, and has managed to do so pretty well. However, it has to spend 80% of its resource on statutory services that it cannot avoid and adult social care, so there is not much space for it to make further savings. It can raise only £477,000 for each 1% increase in council tax. It is therefore fantasy for the Secretary of State and Government Members to argue that this is about efficiencies and just doing things a little bit better. It is far more fundamental than that.

When the Minister responds, I wonder if he might deal with the admitted errors that have been made in section 31 grant calculations in respect of authorities such as Knowsley. Apparently the council was told, after the legal deadline for setting its budget, that there was going to be clawback, because the Department had miscalculated the money due under section 31. To repay that money, Knowsley Council might have to raise council tax by an extra 2%. It cannot do so, however, as it has already set its budget. I hope the Minister will deal with the mistakes made by his Department. The effect on poorer councils such as Knowsley and Liverpool could be devastating. It is bad enough to lose 64% of resource and bad enough to lose 45% of the money used to carry out statutory duties, but to then have further monies clawed back because of a mistake by the Government is completely unconscionable. I hope the Minister in his reply will at least be able to give me some assurances about that clawback and what the Department is going to do about it.

[Several hon. Members rose—]

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[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Rishi Sunak)]

May I start by echoing the sentiments of the Secretary of State and hon. Members on both sides of the House? Within the short space of time that I have served as Local Government Minister, I have seen countless examples of the lengths to which councils go to serve their communities. It is a privilege to represent them in the Government, and I commend the hard-working staff and councillors delivering the services on which our communities depend.

I am proud that this Government are listening to those councils, recognising the pressures they face and responding to their concerns. That is why local government is seeing a real-terms increase in financial resources over the next two years. That is why local government is benefiting from an extra £2 billion in social care funding, and that is why local government is keeping billions more of its own money through business rates retention.

[Maria Eagle]

The Minister has just asserted that local government will have a real-terms increase. Does he accept that, as the National Audit Office has said, a 49.1% real-terms reduction in that funding has occurred in the past seven or eight years since the Conservative party has been in power?

[Rishi Sunak]

As the National Audit Office pointed out, this Government were alert to the requirements of adult social care building as a pressure. This Government responded by delivering extra money for adult social care.

In general, what this Government are doing is working. In adult social care, we have seen delayed transfers of care fall by 34% in the past year. In housing, we are seeing record levels of new home building and infrastructure investment, and from Teesside to the west country, we are seeing areas seize the opportunity to shape their own future. My hon. Friend the Member for Sutton and Cheam (Paul Scully) was absolutely right when he said that other people may paint a gloomy, downbeat picture, but there are examples of councils delivering for their constituents across the country, and as he pointed out, Kingston is doing a fantastic job.

Indeed, according to the LGA, over 80% of people are satisfied with their local area as a place to live, and satisfaction with local council services has remained entirely stable. To ensure that that continues, it is right that we update and modernise our current funding formulas. In the short term, I want to reassure the hon. Member for Garston and Halewood (Maria Eagle) that the Government are not clawing back section 31 grants, as she suggested might be the case. My right hon. Friend the Secretary of State confirmed that last week.

My hon. Friends the Members for Christchurch (Sir Christopher Chope) and for North East Hampshire (Mr Jayawardena) rightly asked about negative RSG. The Government are aware of the strength of feeling on that issue. We are planning to look at fair and affordable options for addressing that problem and will consult on it shortly after the local elections.

My hon. Friends the Members for St Austell and Newquay (Steve Double) and for Lewes (Maria Caulfield) spoke passionately about the rural areas they represent. They highlighted the historical unfairness in funding that their councils have suffered and why they think that should be addressed. I can confirm to them that understanding the particular costs of delivering services in rural areas and analysing the relative resources they have will absolutely be considered as part of our fair funding review.

My hon. Friend the Member for Bexhill and Battle (Huw Merriman) spoke about the importance of getting population growth right. Areas such as his have seen increases in the number of those of a particular age, which puts costs on to certain service areas. He is right to highlight that the new funding formula should use up-to-date population information and that it should be dynamic and respond to what is happening on the ground.

We have heard about children’s services, and it is absolutely right that we focus attention on vulnerable young people who are denied the stability that many of us sitting in the Chamber have enjoyed. It is a privilege for me to be the Minister responsible for the troubled families programme. Delivered in partnership with local authorities, the programme will invest £1 billion to help the most vulnerable in our society. I spent a morning last week in Liverpool hearing at first hand from the families themselves about the difference that this programme is making to their lives. Conservatives like to measure success by the outcomes we achieve, not just the amount of other people’s money that we spend, and the results are hugely encouraging.