Local Government Finance (England)

Nigel Evans Excerpts

Wednesday 10th February 2021 Commons Chamber

[Ben Everitt (Milton Keynes North) (Con)]

It is a pleasure to speak in a local government finance debate, because it is an area close to my heart. I want to begin by echoing words that have been spoken on both sides of the Chamber: councils have absolutely played a blinder during the pandemic. We have asked a lot of our local authorities at every level, and they have consistently delivered in the most challenging circumstances. Those circumstances are challenging not just because of the pandemic, but because of the financial situation councils have faced over the past few years.

The structure of the settlement between local and central Government needs to be reformed. There is something fundamental about the revenue support grant and financial settlement that needs to be reformed. Put bluntly, it is broken. We cannot keep bailing it out year after year. The fair funding review, which was set to come in about 18 months ago, and then again this year, was a very good way of going about that reform, and I commend the Department for the work it has done to identify and address the issues. It is unfortunate that emergency measures had to be put in place during the pandemic and that we did not get to the stage we needed to in implementing the review.

The problem is that it is about much more than simply tweaking the formula. We need to look at the whole relationship between where revenue is raised and where it is spent, and that involves looking much wider than simply at council tax, formula grant and the new homes bonus, which has been such a lifeline to councils over the last few years. We need to look at how we reform business rates. Some in this Chamber have argued for 100% retention of business rates, and there is definitely an argument for that, although it might make some London authorities richer than some small European countries. Some might see that as no bad thing, but we need to make sure that there is an equitable distribution of business rate revenue that supports our wider goals.

It is those wider goals that I want to spend a couple of moments talking about. The first is levelling up and the second—not to sound like a broken record from the Housing, Communities and Local Government Committee—is of course social care. Let us take levelling up first. We cannot level up until we reform the way we distribute financial support for house building. At the moment, we are supporting houses in areas where the markets need it; what we need to do is recognise that housing is part of the solution to levelling up. We have to make a choice: are people going to live in an area, or are we going to put the jobs there? It is about pump-priming, and we need to make a call on investing in housing in the former red wall areas and other areas that need levelling up. I am passionate about that, and I know that the Minister and the Secretary of State are aware of that.

We also need to recognise that we do not level up without providing sustainable enterprise—jobs for the people who live in those houses. We need to make sure that we are not just looking at this from a departmental point of view, but working across Government to realise this country’s ambition to be truly one nation and a global Britain in a newly connected world.

Looking specifically at the problems we face in the formula grant and the amount allocated to local government to spend on services, the elephant in the room is of course social care. Reforming the social care element of funding—how the revenue is raised and how it is distributed —is urgent now. It is the one big thing we need to fix. There are many solutions, and I believe there is cross-party support for many of them. We are in the middle of dealing with a pandemic—in fact, no, we are hopefully near the end of dealing with a pandemic—and now is the time to reach across the aisle, to look at how we fund social care in a sustainable way and to take these things forward in a non-partisan manner.

[Mr Deputy Speaker (Mr Nigel Evans)]

There will now be a time limit and I hope that Dame Diana Johnson has been told that it is six minutes—[Interruption.] No? Well, you know now, Dame Diana. I am sure you will be incredibly flexible with your speech. The wind-ups will begin no later than 7 o’clock.

[Dame Diana Johnson (Kingston upon Hull North) (Lab) [V]]

Thank you, Mr Deputy Speaker. I am very pleased that both the Secretary of State and the shadow Secretary of State opened the debate by paying tribute to the vital role that local government has played in our national response on covid. I would like to personally thank all the local government officers in Hull for their amazing work over the past 12 months in supporting our community. In my view, local government must be central to any serious plan for levelling up that the Government bring forward, but sadly, in Hull over the past decade it has felt more like levelling down.

The Chancellor, who was previously so adept at locating the forest of magic money trees, has made the deliberate and calculated political decision to underfund local government by around £2 billion and to invite local councillors to make up that funding shortfall by levying a large council tax increase of up to 5%. That would be around 4% above the current rate of inflation even before the fire and police precepts were added. I find it disgraceful that the Chancellor is playing political games at a time of a national public health and economic crisis, devolving blame and not power, and yet again providing only a sticking plaster solution to the issue of social care, despite the Prime Minister’s promises. As the Chair of the Select Committee, my hon. Friend the Member for Sheffield South East (Mr Betts), said, there was a joint report from the Health Committee and the Local Government Committee a few years ago—I was a Member of the Health Committee at the time—that set out a way forward. It is unfortunate that we still have not had a response from the Government on those very sensible proposals.

It is not just that local authorities in the poorest areas have had the deepest funding cuts since 2010. The areas that those councils represent also have the poorest families who have been hardest hit by the decade of austerity and then by the covid crisis over the past year, as unemployment, which is always higher in those areas, has risen sharply. Many of those families are currently having to choose between heating and eating, and they simply cannot afford the large increase in council tax made in Downing Street. The council tax is a regressive tax that hits hardest the low-income working families who are just outside the scope of benefit entitlement, so a 5% council tax hike would be a major act of austerity targeted at those families at the worst of times.

In Hull, a 5%-plus council tax increase would raise little for local services such as adult social care and children’s services, which are already under huge pressure; it would instead cause disproportionate misery for families who simply cannot afford any extra tax burdens at this time. Council tax increases also raise less for services in disadvantaged and deprived areas than in wealthier areas. A 1% council tax hike in Hull who would bring in around £883,000. In the East Riding, our wealthier neighbour, that same 1% would bring in £1.7 million. So a 5% council tax increase in Hull would generate £4.4 million, but that would not close the budget gap of £13 million that Hull City Council will face in 2022-23. Given the 80-seat Tory majority, this council tax bombshell will no doubt be forced through the House tonight. It will then fall to local councillors to make the unenviable choice of whether to pass on this austerity measure made in Downing Street to low-income working families to maintain services, or to reject this austerity made in Downing Street and make further cuts to services. This puts councils between a rock and a hard place.

In conclusion, it is worth reflecting once again, in this centenary year, on the events in Poplar in 1921, when Labour borough councillors rejected the idea that the poor should keep the poor and refused to impose austerity on the poorest families. They went to prison for it. Their victory secured equalisation of the rates—a fairer system of local government finance that lasted decades, apart from a few episodes such as the poll tax, until the Tories and the Lib Dems in the 2010 coalition Government started year by year to dismantle the idea of fairer funding for poorer areas. We now face the renewed need to battle for a fairer deal for areas such as Hull and other disadvantaged areas in our country, and for funding that works for working families in those communities.

[Mr Deputy Speaker (Mr Nigel Evans)]

I am sorry, Dame Diana, that you were not earlier informed of the time limits. I understand that you have been, Nickie.

--- Later in debate ---

[Margaret Greenwood (Wirral West) (Lab) [V]]

I begin by paying tribute to the hard work and dedication of Wirral Council workers and Wirral Council throughout the pandemic.

Sadly, financial challenges are nothing new to our local councils. More than a decade of Conservative Government austerity has put immense pressure on our local authorities and pushed many of the services that we all rely on to near breaking point. According to the Special Interest Group of Municipal Authorities, Wirral Council has had its spending power reduced by £124 million, or 30%, since 2010-11. The authority was in a position in which it had to save around £40 million next year, and it has recently been forced to consult on difficult proposals that impact on public services because of the Government’s austerity measures. Other councils up and down the country have also found themselves in extremely difficult positions because of the Government’s actions. In addition—and as a result of the pandemic and measures to combat it—councils around the country face huge financial uncertainty over the next few years and into the foreseeable future.

It is therefore a matter of real concern that the Government have given no clarity over funding levels after March 2022. As the Local Government Association has called for and as council officers in Wirral have emphasised to me, it is vital that the Government provide a multi-year settlement in 2022-23 to put councils on a long-term and sustainable footing. Ministers must also demonstrate meaningful progress towards a solution to the funding crisis in adult social care. Hidden in the fine print of the Chancellor’s November spending review was an assumption that councils would raise council tax by up to 5%. Surely the Chancellor must have been aware that such a move would place a significant financial burden on households, particularly those in hardship, in a year of economic uncertainty.

Our country has had the worst recession of any major economy, and families up and down the country are already worried about paying the bills and putting food on the table. A decade of irresponsible choices by the Conservatives has had an impact on household finances, even before covid hit. A quarter of UK households went into the covid-19 crisis with less than £100 in their bank; 3.6 million people were trapped in insecure work; and the UK was one of the most unequal countries in Europe. To make matters worse, the Government plan to cut universal credit by £1,000 a year, despite campaigning by Labour and numerous charities on this issue. In November last year, a coalition of more than 60 organisations, including the Joseph Rowntree Foundation, Child Poverty Action Group and the Trussell Trust, said that this cut would be “a terrible mistake” and that,

“The removal of this support would not only be immoral, but it will also damage the UK’s recovery”

from the pandemic.

The Office for Budget Responsibility estimated at the time of the 2020 spending review that the number of unemployed people would surge to 2.6 million by the middle of this year. For the Government to undermine council funding to such an extent that local authorities have to increase council tax to continue paying for crucial services such as adult social care is nothing short of shameful.

Ministers should address the crisis in social care and come forward with the necessary funding. It is disappointing that the public health grant for 2021-22 has still not been announced, leaving councils with yet more uncertainty. I have made this point previously in the House, but it is worth making again: the Government must increase the public health grant for next year. The Health Secretary told me in November that the Government would increase it, but that is not what the Treasury said; it said that the public health grant would simply be maintained. The Association of Directors of Public Health has said:

“In the current circumstances, and following years of cuts to public health, it is completely incomprehensible that the Government is not increasing the public health grant”

to local authorities next year. I urge the Minister to work with colleagues across the Government to ensure that local public health teams get the funding they need to continue to meet their public health responsibilities.

In March last year, the Government told more than 300 council leaders that they stood ready to do

“whatever is necessary to support councils in their response to COVID-19.”

However, they later backtracked and said that councils would not be fully reimbursed for costs during a pandemic and that they should not

“labour under a false impression that what they are doing will be guaranteed funded by central government”.

This is a complete betrayal of our communities and the councils that serve them by the Government at this extraordinarily difficult time. Instead of putting councils in the position of having to increase council tax, the Government should stand by their pledge to do whatever is necessary to support councils and give them the funding they need to run local services. The Government should also give local authorities the confidence that they need to plan ahead in these desperately uncertain times by giving them clarity over longer-term funding.

[Mr Deputy Speaker (Mr Nigel Evans)]

We now go via videolink to Ian Liddell-Grainger. [Interruption.] Ian, have you got a jacket, please? You should have a jacket. We will pause briefly while the jacket is put on. Thank goodness we cannot see below the jacket.