Local Authority Financial Sustainability: NAO Report

Mike Amesbury Excerpts

Tuesday 20th March 2018 Westminster Hall

[Mike Amesbury (Weaver Vale) (Lab)]

I beg to move,

That this House has considered the National Audit Office report on the financial sustainability of local authorities, HC 834.

It is a pleasure to serve under your chairmanship, Mr Evans. I will start by doing something very simple that we do not do enough in this place, or in the political world more broadly: saying thank you. I want to say thank you to our councillors, mayors and local government staff. [Hon. Members: “Hear, hear.”] As a former councillor, I know that local government holds our communities and services together and makes our towns and cities what they are. Our local government leaders take decisions and hold responsibility for budgets that directly affect their constituents just as much as, if not more than, many Members of Parliament. They deserve more recognition and respect for that than they are sometimes given. However, since 2010 their very challenging job has become almost impossible. The National Audit Office report makes it clear that funding has been cut by nearly 50%.

[Stephen Lloyd (Eastbourne) (LD)]

I thank the hon. Gentleman for securing this important debate. The Times, which is not known for its hyperbole, stated recently in an editorial:

“All politics is local, and local government is going bust”.

Does he agree that the Government are culpable and must take responsibility for their funding decisions, and that it is down to them to stop local government going bust?

[Mike Amesbury]

I do. As a result of that 50% cut, services have been drastically reduced. Pressures and demands are increasing, but the Government have failed year after year to provide councils with fair and sufficient funding.

[Derek Twigg (Halton) (Lab)]

Will my hon. Friend give way?

[Mike Amesbury]

I give way to my colleague and constituency neighbour.

[Derek Twigg]

I congratulate my hon. Friend on securing this important debate. He knows that Halton Borough Council, which serves our constituencies, is under extreme pressure. It is one of the smallest councils, and its budget will have been cut by nearly 60% by the end of the Parliament. Does he agree that that puts the council’s sustainability and its ability to deliver its statutory duties, particularly for social care, at great risk?

[Mike Amesbury]

Of course. Things have been particularly difficult for local children’s services and adult services, about which we have recently lobbied Ministers.

Some 66.2% of councils now have to use their reserves for social care provision. These figures are not mine or the Labour party’s; they are in the National Audit Office report. Last year local authorities overspent by £901 million. Minister after Minister has ignored the crisis or tried to pretend that using calculations such as core spending power can somehow mask the level of the cuts that councils face, especially those in highest need.

[Stephanie Peacock (Barnsley East) (Lab)]

I congratulate my hon. Friend on securing this important debate and echo his thanks to our councillors and local government workers. Does he agree that it is outrageous that my local authority, Barnsley Council, faces cuts of 30% between 2015 and 2020? Such cuts put an unfair burden on local authorities and have a significant impact on local services. It is clear that the Government should take responsibility and do something about that.

[Mike Amesbury]

I agree. It took the Conservative leader of Surrey County Council to threaten a referendum on a 15% council tax rise to get any response at all from the Government. Even then, they just placed further accountability on local taxpayers. I am surely not the only person who was a little concerned that a financial crisis so grave that it required a 15% council tax rise in one of the wealthiest areas of the country appeared to go unnoticed for so long by so many local MPs. It is all the more worrying that those MPs include the Minister of State for Housing, Communities and Local Government, Ministers of State for Education, the Secretary of State for Health and Social Care, and the Chancellor of the Exchequer. Is it any wonder that Ministers do not appear to realise that we have a cash crisis in councils, schools and the NHS?

[Thelma Walker (Colne Valley) (Lab)]

The NAO report shows that the number of looked-after children has increased by 10.9% since 2010, but the Chancellor failed to offer local authorities any additional support to address that in the Budget or the spring statement. Does my hon. Friend agree that the Government must act to provide more funding to support looked-after children?

[Mike Amesbury]

Certainly. In fact, there will be a £2 billion shortfall by 2022, so there is a real crisis in children’s services.

One of the other Surrey MPs happens to be the Environment Secretary. Given his experience of dealing with the outcomes of difficult referendums, I cannot imagine why he was not keen to support that one.

Many colleagues in the Chamber and beyond will know that although cuts have hit the poorest areas hardest, the damage is not limited to them, as the Local Government Association rightly points out. Rising pressures on social care, transport and other services cut across borough and political boundaries. As such, I wish the Defence Secretary all the best with his petition to save bus services in Staffordshire—I hope he gets a sympathetic ear from the council. Many in the Chamber might have been a little surprised that he addressed his concern locally rather than nationally, where the real fault lies, but raising it nationally might have resulted in the Chancellor informing him to shut up and go away—a statement that the Defence Secretary is all too familiar with.

[Afzal Khan (Manchester, Gorton) (Lab)]

I, too, congratulate my hon. Friend on securing the debate. We both served on Manchester City Council, a great council with great leadership that has been devastated by cuts. Greater Manchester leaders say that they may be close to bankruptcy in four years if Government cuts continue in the same way. Does he agree with the report’s finding that, instead of blaming councils, the Ministry of Housing, Communities and Local Government should recognise that it has failed in its duty to monitor and mitigate the impact of budget cuts on our local authorities?

[Mike Amesbury]

I agree with my hon. Friend and former colleague on Manchester City Council.

Councils of all colours and types are near breaking point. Indeed, Conservative-run Northamptonshire County Council has already reached that point, although, as the report shows, any suggestion that its funding challenges are unique is wide of the mark. Some 10.2% of local authorities have less than two years’ reserves. They are at breaking point, and we could face another 15 being served with section 114 notices. It is only through the sound financial management of most councils that we have not seen more local authorities topple.

Warnings have come from councils across party politics and from the cross-party Local Government Association. The National Audit Office report confirms what those at the frontline of local government have been saying for years: funding is down by almost 50%, while demand for services such as adult and children’s social care and homelessness support rises. Lack of central Government support has meant that the tax burden has shifted to local taxpayers. The National Audit Office concludes that:

“As funding continues to tighten for local authorities and pressure from social care grows, there are risks to statutory services.”

Those findings are stark and should alarm us all, and not just in politics but well beyond. The picture that the report paints is familiar to Halton Borough Council and Cheshire West and Chester Council in my constituency, as it will be across the country. Pressures on some areas of children’s services have increased by 26% in Cheshire and by 83% in the more deprived Halton, as my hon. Friend the Member for Halton (Derek Twigg) pointed out, yet the recent Budget failed to offer more money for that vital area of responsibility. That would be damaging enough when taken in isolation, but when we consider the human and future economic costs of failing our vulnerable children, it is truly damning. By 2020 the shortfall for children’s services will be a massive £2 billion.

[Matt Rodda (Reading East) (Lab)]

One of the great problems for many children’s services departments operating in areas of high housing cost is that it is particularly difficult to recruit staff. We have a severe problem with that in Reading. We are outside the boundary for outer London weighting, which stops at Bracknell, even though that is an area of lower housing costs, and we suffer from a severe shortage of skilled workers to work in our children’s services departments. I understand that is a common problem for local authorities, and particularly for those in areas of high housing costs. There are issues with both pay for staff at those grades and the ability of local authorities to provide their own council housing. Reading had a plan to build 1,000 council houses, which sadly was stopped by George Osborne. Would my hon. Friend like to comment on the twin problems of low pay for key staff and the inability of local authorities to build housing for them?

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[Mike Amesbury]

Indeed, those factors are highlighted in the report. Perhaps its most concerning aspect is the finding that the Government do not have a long-term funding plan for local authorities. That confirms the fear of many councillors and mayors I have spoken to. They have been offered no clarity about how 100% business rate retention will work, especially for those areas that will be net losers. Other councils talk of reaching a cliff edge in 2020.

My question to the Minister is simple. Does she have a long-term funding plan for local authorities and, if so, what is it? Councils need to know now. At what stage in the near future will she legislate to ensure that local authorities can use 100% of the money they raise locally for the good of their residents? If she cannot give our councils the stability and guarantees they need, she should not be surprised if future ambitions around homes, schools and services fall even further short of the mark than they do now. Between 2010 and 2017, spending fell on planning and development by 52.8%, on housing by 45.6%, on culture by 34.9%, and on highways—we are all familiar with potholes and everything else—by 37.1%. Again, those are not Labour party figures, but figures from the National Audit Office report.

A national Government who try to lecture local government about financial stability and saving for the future have no credibility to do so when their own watchdog makes such a serious statement about their short-sighted approach. The status quo can no longer continue. Our councils, our communities and the dedicated staff who work in them deserve and demand better.

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[Mrs Wheeler]

I thank the hon. Gentleman for that intervention and repeat: the money from this Government has increased from £44.3 billion in 2017-18 to £45.6 billion in 2019-20. The National Audit Office rightly noted that local authorities are increasing their spending on the social care services that councils provide to our elderly and vulnerable citizens, in the face of growing demand. This is why at the spring Budget in 2017 an additional £2 billion was announced for adult social care. This year we have seen how that money has enabled councils to increase provider fees, provide for more care packages and reduce delayed transfers of care.

[Mike Amesbury]

That still equates to a 3% reduction from 2010 to 2017. It is a real-terms reduction.

[Mrs Wheeler]

I am always delighted to hear the dexterity of mathematicians in this building. It is £44 billion up to £45 billion, which I see as an increase. [Interruption.] I will move on. Local government and the NHS have worked in collaboration this year to deliver significant improvements in care. That is highlighted by the 26% reduction in delayed transfers of care, when comparing February this year with February last year. That is not all, however, because a further £150 million is being made available in 2018-19 for adult social care support grants. That, alongside the freedom to raise more money more quickly through the use of the adult social care precept, and the improved better care programme, means that councils have access to £9.4 billion in dedicated adult social care funding over the three years from 2017-18 to 2019-20.

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[Mrs Wheeler]

I would be devastated if that happened and I cannot imagine why it would happen, with the growing economy that we have.

We will continue to work with the sector to identify opportunities to increase the level of business rates retention further at the right time. We are already making progress towards that. The Government have announced an expansion of the piloting programme for business rates retention into 2018-19. In the latest round of pilot bids, more than 200 authorities put themselves forward, demonstrating local government’s enthusiasm for business rates retention. We are enthusiastic about working with them to take that agenda forward. We will be taking forward 10 new pilots, covering 89 authorities, instead of the five that we originally planned. A further pilot will begin in London in 2018-19, and existing devolution pilots will continue in 2018-19. The 10 that we have selected, taken alongside the existing pilots, give a broad geographic spread.

[Mike Amesbury]

At what stage will the Government legislate, as they previously stated they would, to ensure that there is 100% business rates retention? And surely, as part of the funding mix, an area-based grant needs to be retained.

[Mrs Wheeler]

I am afraid that the hon. Gentleman will have to wait for that to happen.

I referred to a broad geographic spread. That was carefully thought through, as we want to see exactly how the system works across the country, and the pilots will ensure that that happens. The expansion of the pilots, and our plan to do more piloting in 2019-20, is how the Government are listening to the voice of local councils. The precise benefit to the areas involved will depend on the economic growth that they achieve. I am very keen to see what we can learn from these and the other pilots. We should be clear: the system of business rates retention is helping local authorities to benefit from the proceeds of growth.

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[Mike Amesbury]

I thank you, Mr Evans, and the Minister. Of course, I too am disappointed at the austerity clearly displayed on the Government Benches—that symbolises the Government’s relationship these days with local government.

It is clear that we are at a watershed moment. The National Audit Office paints a stark picture, highlighting the genuine risk to statutory services. It is clearly time to change the record. Austerity is not working. It is a political choice. Certainly, as my hon. Friends have pointed out, it is not a sound financial one. Councils are crying out for certainty and are desperate to fund vital services and create better, healthier, more prosperous communities for all. We are a wealthy nation and must get our spending priorities in order. Rather than giving the richest corporations and individuals billions of pounds in tax cuts, let us fund local government services and help the most vulnerable to thrive and reach their full potential. We demand and need fair funding for all, now.

Question put and agreed to.

Resolved,

That this House has considered the National Audit Office report on the financial sustainability of local authorities, HC 834.