Local Government Funding: Merseyside

Maria Eagle Excerpts

Tuesday 30th October 2018 Westminster Hall

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

I beg to move,

That this House has considered local government funding in Merseyside.

It is a pleasure to serve under your chairmanship, Mr Hollobone. I am happy to welcome several of my Merseyside colleagues to the debate.

The Prime Minister says austerity is over. The Chancellor says austerity is coming to an end. Aside from the clear difference between those two statements, neither is the experience of local government leaders and councillors on Merseyside, nor is it set to be their experience over the next few years. My constituency covers two local authority areas, Liverpool City Council and Knowsley Metropolitan Borough Council. I see that my right hon. Friend the Member for Knowsley (Mr Howarth) intends to speak in the debate, so I will focus my remarks on the situation facing Liverpool City Council and he will deal with that facing Knowsley Metropolitan Borough Council. I confine my remarks in that regard to simply saying that the challenge facing Knowsley is equally difficult to Liverpool’s, although it is a smaller authority.

Liverpool City Council has already had to cut £340 million from its budget—some 58% of its total resource—since 2010. This year, it must find a further £41 million of cuts to make up the balance of the £90 million reduction it has been seeking over the city’s three-year budgeting period, which comes to an end next March. By 2020, it will have cut £420 million in total, which was 64% of its budget before austerity was unnecessarily and zealously imposed to such a high degree by the Lib Dem-Tory coalition Government in 2010. Those figures show that there is a lot more cutting to come over the next two years, regardless of what the Chancellor said to us yesterday. Austerity is set to continue for Liverpool City Council, no matter the measures in yesterday’s Budget.

According to the National Audit Office, local authorities in England have seen a 49% reduction in Government funding since 2010, so the cuts imposed on Liverpool have been far higher than average, despite its people having higher levels of deprivation and poverty than the average. Indeed, Liverpool City Council is ranked as the fourth most deprived local authority in the latest indices of multiple deprivation statistics. In fact, 10 of the city’s 30 wards contain a local area within the 1% most deprived nationally, with one—Speke-Garston—in my constituency. Liverpool is ranked as the third most deprived for health and disability and the fifth most for income and employment.

In any fair system, central Government would mandate below-average cuts on Liverpool; that would happen in any system that took any note of the needs of the people of different areas. However, the way the coalition and Tory Governments since 2010 have imposed austerity most emphatically does not take account of the relative needs of the people of different areas who have to deliver the cuts demanded of them. Liverpool has been doubly disadvantaged by facing a larger cut in addition to having more and greater needs to meet.

Take social care as an example. In 2010, Liverpool City Council spent £222 million supporting adults who need help in the community, either because of age, infirmity or disability. That has been reduced to £152 million, despite our ageing population and our population having higher levels of ill health than in many other areas—as set out in the indices of multiple deprivation—meaning more people need the help provided by adult social care services.

[Conor McGinn (St Helens North) (Lab)]

I thank my hon. Friend for securing the debate and for the leadership she gives to Merseyside MPs on these issues. To put this in context, central Government cuts to St Helens Council’s budget are the equivalent of two years of its social care budgets. Similar to Liverpool, we have an ageing population and an expected increase in people suffering from conditions such as dementia. Does she agree that that is completely unsustainable, and that austerity certainly has not ended, for my constituents or hers?

[Maria Eagle]

I agree with my hon. Friend. It is impossible to see how anybody looking at these facts could assert that austerity is either over or is even coming to an end. We obviously do not know what the Government think between those two poles, but it is one or the other, depending on where they are. From where we are, it does not seem that either assertion comes near to explaining the truth.

In Liverpool, £70 million less is being spent on adult social care alone due to the cuts caused by austerity—this political choice that Governments since 2010 have made. Thresholds for eligibility for that help have therefore clearly had to increase, so fewer people get it despite more people needing it. The lack of that support, which should be there and would have been in the past, creates extra burdens on individuals and their families. That is the direct consequence of these cuts in Government funding.

[Mr Jim Cunningham (Coventry South) (Lab)]

This is a timely debate. Coventry has experienced exactly the same sort of local government cuts as Liverpool, and through the loss of grants—that is what caused all this—well over 50% of its budget is really not there anymore. One big problem in Coventry—I am sure my hon. Friend will touch on it—is the funding of children taken into care. She just touched on social care. Lots of families now have to find money for social care that they can ill afford, driving them into the hands of money lenders.

[Maria Eagle]

My hon. Friend will know the figures for Coventry very well. He set some out, and they sound similar to some of the figures we have seen on Merseyside. Any application for Coventry to join Merseyside will of course be considered by the appropriate authorities, if my hon. Friend wants to take that back to Coventry.

Nationally, £7 billion has been cut from social care budgets, so the £650 million announced by the Chancellor yesterday—to much fanfare—will make little impact on the size of the problem created by the Governments he has been a member of since 2010. I saw today that that figure will cover not only adult social care but children’s, and it also apparently includes money for NHS winter pressures next year, so perhaps that figure is not quite all it was cracked up to be in the Budget statement. However, even if it were, it would not be enough to deal with many of the problems created by the cuts to Liverpool’s social care that have had to be made in the last eight years and are still ongoing.

What about reserves? Tory Ministers frequently answer questions about the scale of the cuts faced by suggesting that authorities should spend their reserves; we often hear that cry. Liverpool has spent £146 million of its reserves to support social care spending, even at the reduced levels it now provides. Its reserves are down to £17 million, so I hope that the Minister was not planning to tell me that Liverpool City Council should spend its reserves. It is clear that that is not a long-term solution. In fact, it is not a solution that will work for much longer at all. Indeed, the NAO says that one in 10 authorities nationally will have nothing left in three years’ time if they continue to use their reserves to pay for social care, as Liverpool has done. Even if those remaining reserves were spent only on social care and nothing else, local authority reserves would be completely used up by 2022.

What about new money? The Mayor of the city of Liverpool, Joe Anderson, has adopted—quite entrepreneurially, I think—an invest to earn strategy, for which he has been criticised but which has yielded so far an extra £13 million a year in new revenue. His original idea was to use that money to support growth in the local economy. However, because of the extent of the cuts in Government funding and the damage they have done—the dire impact that they have had on some of the poorest and most vulnerable members of society in Liverpool—he has had to use the money to support services that would otherwise have been cut even further. For example, all our Sure Start centres have been kept open, even though some of the services they provide have gone. However, the tide of extra need being caused by ongoing cuts in Government support and social security benefits is likely to overwhelm the extra funding that the Mayor has brought in via invest to earn, and to do so soon. In that regard, the roll-out of universal credit will mean 55,000 people in the city being transferred on to it.

[Ms Angela Eagle (Wallasey) (Lab)]

Does my hon. Friend recognise the experience in Wirral with the roll-out of universal credit? That has led to a need for 30 extra tonnes of food and created a 32% increase in the use of food banks because of the hardship that it has caused.

[Maria Eagle]

My hon. Friend, perhaps unsurprisingly, has anticipated my next point—we tend to be on the same wavelength. The Trussell Trust says that in areas where universal credit has been rolled out, it sees a disproportionate increase—my hon. Friend reports a big increase in Wirral—in food bank referrals, as opposed to a lower increase in other areas. The Chancellor is putting some money back in for universal credit, to ameliorate the cuts made by George Osborne in Department for Work and Pensions budgets, but that will not prevent millions of poor and vulnerable people from losing money. They will just lose a little less—and that is without the administrative chaos and design features of this benefit that cause poverty and destitution in Liverpool. Only the Liverpool citizens support scheme, the mayoral hardship fund and the discretionary housing payments, on which the Mayor spends more than central Government provide in moneys, stand between many families and destitution.

The Mayor of Liverpool, Joe Anderson, has repeatedly invited Ministers to Liverpool to inspect the books and tell him just what else he is supposed to try in order to deal with the funding crisis that austerity has created, but not one has taken up the challenge. Indeed, he even sent train tickets to Eric Pickles, when he was Secretary of State, to facilitate a visit, but he did not use them. Perhaps this Minister can take up the offer to inspect the books and see what else he can suggest that Liverpool City Council do; we would be most happy to welcome him. If not, perhaps he could indicate that the Mayor of Liverpool’s suggestion of a royal commission on the funding formula will be seriously considered. After all, with things going as they are, soon there will be no consideration of levels of deprivation or need in any of the ways that funding is allocated to local authorities, nor will any account be taken of the ability of the people of a local area to pay for all that is needed themselves; there will be no elements of redistribution. That is a recipe for entrenching disadvantage and ending social solidarity.

According to the Local Government Association, 168 councils will soon receive no revenue support grant at all and will rely only on business rates and council tax for their income. That disadvantages Liverpool again, because the council tax mix and base is so low. For example, Liverpool has more people than Bristol, but raises £38 million less in council tax, because almost 60% of Liverpool properties are in band A, compared with an average of 24% across the country, and 90% are in bands A to C, compared with 66% nationally. In addition, almost 36% of council tax payers are eligible for a discount because of their circumstances, whereas the national average is 16%. However, Government funding takes no account of these issues. That makes a big difference. If Liverpool was at the national average for these things, that would have meant an additional £97.7 million in council tax available to be collected every year. As it is, Liverpool can raise only £167 million in council tax. Similarly, less is raised in business rates in Liverpool than in many other places, because of the density and mix of local businesses.

Forcing the people of the city to rely, for meeting higher levels of local need, on weaker business rate and council tax yields is not a fair way to fund local services. I therefore finish by asking the Minister to have the courage that his predecessors lacked and visit Liverpool to inspect our books and make some suggestions as to what else, if anything, can be done. I also ask him to address the question of establishing a royal commission on local Government funding to ensure that the Government of which he is a member do not entrench existing deprivation and remove elements of redistribution that have in the past ensured social solidarity and improved life chances, and equality between different areas of the country. We need that now more than ever.

[Several hon. Members rose—]

--- Later in debate ---

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

It is a pleasure to serve under your chairmanship, Mr Hollobone.

I start by congratulating the hon. Member for Garston and Halewood (Maria Eagle) on securing this debate and it is good to see a strong turnout from Merseyside colleagues as well.

It did not sound like the hon. Lady was aware that in fact my very first visit as Minister for Local Government was indeed to Liverpool, both to see the City Council and to work with the troubled families programme, and I was delighted to accept an invitation from the hon. Member for Liverpool, Wavertree (Luciana Berger) shortly after being appointed to this particular role.

Being relatively new to this role, I am the first to say that local authorities have done a commendable job over the past few years, maintaining a strong level of services in the face of rising demand. In responding to the specific points that the hon. Member for Garston and Halewood made, I will first outline my broad vision for the role of local government, which consists of three particular areas: first, to drive economic growth; secondly, to help the most vulnerable in our society; and, lastly, to build strong communities. I will take each of these areas in turn, specifically in relation to the points that have been made by hon. Members about Merseyside.

I will start with the economics. In this financial year, councils on Merseyside— including Sefton, Knowsley, Liverpool, Wirral, Halton and St Helens—had an aggregated core spending power of around £1.3 billion. Core spending power is the standard measure of a local authority’s key financial resources. It includes money from the central Government grant, which is typically known as the revenue support grant, but also the money raised locally from council tax, the money raised through the business rates system, and further specific grants from central Government for things such as adult social care, the better care programme and, indeed, the new homes bonus.

Across Merseyside, core spending power is up every single year in this four-year spending period and up 2% this year as well.

[Maria Eagle]

I received a parliamentary answer from a colleague of the Minister about police spending, which said that over the last year £5.1 million of extra money had been given to enable the police to tackle the very serious crime that my hon. Friends the Members for Liverpool, Wavertree (Luciana Berger) and for Wallasey (Ms Eagle) referred to. In fact, that money came from the Government simply allowing a precept increase; it all came from hard-pressed council tax payers in Liverpool and not one penny piece came from the Government. How can the Minister justify the ridiculous figures that he is using, which hide the Government’s contribution by referring to everything else that can be raised in any other way? That is a way of abdicating responsibility.

[Rishi Sunak]

I totally reject the suggestion of hiding. It would be ridiculous to look at any local authority’s financial resources without considering the various ways in which such an authority funds itself. I am delighted that the hon. Lady is focused on keeping council tax low. Indeed, the Government have ensured that council tax today is lower in real terms, across the country, than it was in 2010. We have heard various suggestions from Labour Members about doubling council tax, which is something I assume the hon. Lady, being on the side of hard-working taxpayers like us, would reject.

The idea that the funding formulas do not take account of deprivation or the differing ability of areas to raise council tax is totally erroneous. For example, when the adult social care precept was introduced, it was understood that different areas would raise different amounts from it, which is why in the incremental billions of pounds that the Government have injected into the social care system directly through the better care fund there is an equalising measure to take that into account. That is exactly why, today, the most deprived authorities have a core spending power per household—taking into account all those things, council tax included—that is 23% higher than that of richer authorities. Indeed, that is why areas with larger council tax bases provide more of their area’s resources from council tax; Merseyside provides less than half of the amount those areas do, because the council tax base in Liverpool is that much lower. It is totally wrong to suggest that that is not taken into account.

I think it was alleged that I, or the Government, had removed deprivation from funding formulas. I can categorically say that I have not removed it from any funding formula. We are in a root and branch review of how local government is funded. We are in the midst of various consultations and I would be delighted to have hon. Members’ suggestions.

--- Later in debate ---

[Maria Eagle]

I am disappointed that the Minister chose to take away half of my time to respond. I am afraid he did not deal with the points that were made in the debate, and that is a shame. It is ridiculous for him to suggest in the way he did that the Government take account of deprivation. I would like to see how he came up with the figures in his speech. Liverpool’s local authority has lost 64% of its money, and Knowsley 58%. Our police have had the worst cut in the country, losing 31% of their money, with the fire authority losing 50% of theirs. Liverpool Community College has lost £5 million over the past four years. If that is strongly supporting Merseyside, I hope that the Minister and his Government will stop supporting us, because it is terrible.

Question put and agreed to.

Resolved,

That this House has considered local government funding in Merseyside.