Local Government Finance

Oliver Heald Excerpts

Tuesday 10th February 2015 Commons Chamber

[Hilary Benn]

My right hon. Friend makes an extremely important point. That is why the attempt that the Minister made to include that spending power, when we know that a goodly portion of that money is not in the hands of local authorities, is not a fair reflection. The point I put to the Minister is simply this: the NAO said that the Government should publish figures detailing the change in individual local authority income in real terms since 2010-11 so that the cumulative impact of funding reductions could be plain for all to see. The question is why have the Government refused to do it, and why are we relying on the finance department of Newcastle city council to do the work of the Department for Communities and Local Government?

[Sir Oliver Heald (North East Hertfordshire) (Con)]

The right hon. Gentleman will appreciate that in a constituency such as mine in Hertfordshire we are facing a lot of new building of homes and we need infrastructure. If he deprives my council of the new homes bonus and its community infrastructure levy, how will we provide for all these people in our part of the world? It just does not add up.

[Hilary Benn]

I have no intention of depriving the hon. and learned Gentleman’s local authority of CIL income, but as he raises the new homes bonus, I shall be straight and direct with him. I shall come on to this in a moment—in fact, if he will bear with me, I shall come to that point about the new homes bonus and set out why it needs to change.

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[Hilary Benn]

The size of the reserves held by authorities across the country—they have been criticised by Ministers for doing that—shows the scale of the challenge they face. Councils are doing exactly what families do if they have any money to put by when times are hard, as they do not know what is around the corner or what difficulties they will face. That is my first point. Secondly, a lot of those reserves are earmarked for capital investment, including invest-to-save projects to help deliver savings further down the line. Thirdly, if councils decided today just to spend all of their reserves, that would pay for local government services for about a month and then they would all be gone. Then what should they do? It is no good criticising local councils for having reserves when they are trying to manage their money prudently.

I want to come to the point raised by my hon. Friend the Member for Coventry South (Mr Cunningham) about social care, which is under particular strain because of the growing number of older people. Will the Minister, in replying, tell us what percentage of the better care fund, about which we have heard today, is flowing into local authorities to support social care as opposed to going to the health service? He will be well aware of the pressures faced by local authorities and, as we have just heard and as all hon. Members know, part of the reason for the rising pressure in A and E departments, and for the growing number of elderly people in hospital beds when there is no medical need for them still to be there, is the reductions, in some cases, that have had to be made by local authorities, despite their best endeavours, in entitlement to social care. The Local Government Association estimates that adult social care faces a funding gap of £1.6 billion in 2015-16 and that that is expected to rise to £4.3 billion in 2019-20. Is that a figure that Ministers accept? If so, what do they intend to do about it?

Will the Minister confirm that the new homes bonus takes money away from the most disadvantaged communities and gives it to areas where, in all probability, the new homes would have been built anyway? What does he have to say about the NAO’s conclusion that there is little evidence that the new homes bonus has yet made significant changes to local authorities’ behaviour towards increasing housing supply? Even two of the Ministers on the Front Bench are not wildly keen on it. The Under-Secretary of State for Communities and Local Government, the hon. Member for Bristol West (Stephen Williams), has admitted that he is “not a fan”, and the Under-Secretary of State for Communities and Local Government, the hon. Member for Keighley (Kris Hopkins), was even more frank because he told the House back in November 2013:

“I am afraid the new homes bonus is not about encouraging people to build homes.”—[Official Report, 25 November 2013; Vol. 571, c. 11.]

Given that, why are Ministers so opposed to funding being allocated on a fairer basis, based on need, as we are proposing?

We are lectured frequently about the need to take tough decisions in tough times. If one accepts the argument—those on the Government Benches do not—that the way in which the cuts have been applied is fundamentally unfair to some authorities, one of the things one can do is to redistribute, and the new homes bonus provides an opportunity to do that.

[Sir Oliver Heald]

So what the right hon. Gentleman is saying is that we have to take the homes and he gets the bonus. What is fair about that?

[Hilary Benn]

There is section 106 and there is CIL in order to raise financing. There are also the changes that we are proposing in order to give local authorities, such as the hon. and learned Gentleman’s, greater power over the construction of new homes so that communities can determine where homes are built, but when it comes to the new homes bonus, if one accepts the argument that it is regressive in its impact because it is top-sliced from revenue support grant which is supposed to reflect need and therefore goes towards areas where people want to build homes which tend to be less disadvantaged than others, it is a tough choice. But when people say, “What are you going to do to redress the unfairness of what the coalition has done?”, that is part of my answer.

I know that other Members want to speak so I shall make progress. In these difficult times, what councils want is, first, fairer funding, which we are committed to; secondly, help with longer-term funding settlements so that they can plan ahead; and thirdly, more devolution of power so that they can work with other public services to get the most out of every pound of public funding. We have heard Ministers argue in the past that the relationship of old was based on a begging bowl mentality. A former local government Minister used to talk about that. That is pretty insulting to local authorities which, over the years, have worked hard to grow their economies and create jobs. One cannot look at the growth and success of the city of Leeds over the past 30 years and say that that is the result of a begging bowl mentality. It is because the council, businesses and local people have worked hard to grow the economy, create jobs and improve people’s lives. It was a question of leadership.

That brings me to what is absent from the statement today—devolution of funding to local authorities. I support the city deals that the Government have put in place and I welcome them. I have said that before, but progress has been slow and timid. We had been promised a further deal for the Leeds and Sheffield city regions, following the recently agreed deal with Greater Manchester, but there is no sign of it. Who is running that policy? Is it the Secretary of State, the Chancellor of the Exchequer or the Deputy Prime Minister?

Everyone in the House knows that the reason why the deals are being held up is that the Chancellor wants to impose a metro mayor as part of the deal and the Deputy Prime Minister does not. I am not sure what the Secretary of State’s view is, but he is clearly no particular fan of combined authorities because he said not long ago that he is afraid that they

“will suck power upwards away from local councils”.

In case the Secretary of State has not noticed, combined authorities are local councils coming together freely, voluntarily, in the interests of co-operation, because they see the benefit for their residents. When the Minister replies, will he tell us when Leeds and Sheffield are going to get the same deal as Manchester?

The last point that I want to come on to is about the counties of England. We have heard some voices in the contributions today. It was noticeable that at the recent county councils network conference, for some reason not one of the Department for Communities and Local Government House of Commons Ministers was able to turn up to address the representatives of the county councils. It was extraordinary. I suspect the reason is that county leaders feel wholly ignored by this coalition Government because they see the devolution that has been offered to cities. Where is the devolution to counties and county regions? There is none. If we get the opportunity, we will change that. We would offer economic devolution to every part of England—county regions as well as city regions—to give them greater control over their economic future. On that, I am in agreement with the Minister. We would devolve decision making on transport investment and on bus regulation. If that is good enough for London, it is good enough for the rest of the country.

We would offer funding for post-19 skills, working with businesses and co-commissioning a replacement for the Government’s Work programme to help the long-term unemployed back into a job. We would offer new powers over housing so that communities can build the houses they want in the places they want, and the houses go to the people who need them. By devolving £30 billion-worth of funding—much more than the Government are offering—we would give combined authorities the ability to retain 100% of business rate income growth. The Prime Minister has said that he wants to move towards two thirds, so if he hurries up a bit, he will finally catch up with Labour policy.

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[Robert Neill]

At the end of the day, it is implicit that a Labour Government would carry out a redistribution. We know from experience that the clever—and sometimes surreptitious—tweaking of the weightings in those 270-odd elements that go into the formula grants through the regression analysis was deliberately manufactured to move money away from parts of this country to those that historically tended to vote Labour. There is no getting away from that reality and the same thing will be done again.

My hon. and learned Friend the Member for North East Hertfordshire (Sir Oliver Heald) made a serious point about what would happen to those authorities dealing with housing need, which I thought both parties recognised. The current Government have said, sensibly, that the money should follow the population growth, because that results in the costs of services being given to local authorities. The Labour party wants to scrap that entirely. It is abject nonsense to go down that route.

[Sir Oliver Heald]

If we have to build all these homes in Hertfordshire without the new homes bonus, and if our CIL is cut as the shadow Secretary of State suggested, we will end up with absolute traffic chaos and the whole county becoming a car park. Does my hon. Friend agree that this just does not add up?

[Robert Neill]

I have no doubt that we would also see the imposition of regional planning through the right hon. Gentleman’s delicately termed “county region authorities”. That would be another imposition on local authorities. The new homes bonus has enabled authorities that want to provide homes for their populations to deliver those homes and to pay for the services that such populations rightly demand. There is an inherent contradiction in the Opposition’s argument.

It is significant that Opposition Members are talking about greater devolution. I, too, hope that there will be an increase in the retained element of business rates. Interestingly, that never happened throughout the whole of the Labour party’s watch. They only started to move towards a devolutionary stance after my right hon. Friend the Secretary of State introduced the retention of some of the additional business rate. We have a track record of delivering policies, but they are simply saying that they would do the reverse of whatever they did in the past, which seems fairly normal for the Labour party at the moment.