Covid-19: Funding for Local Authorities

Philip Hollobone Excerpts

Tuesday 24th November 2020 Westminster Hall

[Mr Philip Hollobone (in the Chair)]

I remind hon. Members that there have been some changes to normal practice in order to support the new call list system and ensure that social distancing can be respected. Members should sanitise their microphones using the cleaning materials provided before they use them, and dispose of the cleaning materials as they leave the room. Members are also asked to respect the one-way system around the room.

Members should speak only from the horseshoe. Members can speak only if they are on the call list and cannot join the debate if they are not on the call list. Members are not expected to remain for the wind-ups. Members in the latter stages of the call list should use the seats in the Public Gallery and move to the horseshoe when seats become available.

I remind hon. Members that there is less of an expectation that Members stay for the next two speeches once they have spoken. This is to help manage attendance in the room. Members may wish to stay beyond their speech but should be aware that doing so may prevent Members in seats in the Public Gallery from moving to seats on the horseshoe. There are lots of Members attending this debate, so there will be a time limit, to be advised in due course.

[Rushanara Ali (Bethnal Green and Bow) (Lab)]

I beg to move,

That this House has considered the adequacy of funding for local authorities during the covid-19 outbreak.

It is a pleasure to serve under your chairmanship, Mr Hollobone. One day, there will be a public inquiry into the conduct of the Government during this pandemic and the decisions they have taken, particularly on the provision of finance to different parts of the country, and we will be able to learn what went well and what did not over the past few months. I hope that we will all support such an inquiry, so that further errors are not made in future.

Even before the pandemic, it would have been hard to argue that national Government were friends of local government and local services. Since the 2010 general election, the Government have reduced funding for local authorities by some £15 billion. The National Audit Office has found that Government funding for local authorities has fallen by 49% in real terms from 2010-11 to 2017-18, and that this equates to a 28.6% real-terms reduction. To put that in context, councils have lost 60p out of every pound they had a decade ago. The Institute for Fiscal Studies concurs, saying that local government spending has “fallen significantly”.

Let us never forget that this is not by accident: it was a decision made by Conservative Ministers and their Liberal Democrat coalition partners in the 2010-15 Government. National Government grants were gradually scaled back, so that poorer areas with great need were not provided with the additional funding they needed alongside local income generation. The cuts made in the name of austerity did not fall equally on the shoulders of people and local authorities: they hurt the poorest and most disadvantaged areas significantly, including areas such as Tower Hamlets, where my constituency is. The IFS says that deprived communities—those communities most reliant on public services—such as those in my constituency saw the greatest reduction in national Government funding.

There is another unfairness to the way in which funding was allocated, particularly Government grants, which have pretty much disappeared. That has made it very difficult for local authorities to deal with child poverty. Unfortunately, my borough, which includes two constituencies—Poplar and Limehouse and Bethnal Green and Bow—has the highest child poverty rate in the country. It is vital that the allocation of funding is fair and addresses the actual needs of communities. According to the Local Government Association, between March and June this year, councils have faced a bill of £4.8 billion because of extra costs and lower incomes due to the coronavirus pandemic. It estimates that the cost of the increased pressures on adult social care alone will be £533 million, and that the figure for public health will be £148 million. Future non-tax income losses due to covid will be about £634 million.

In summary, in terms of funding, the coronavirus pandemic has added even greater challenges to already pressurised local authorities up and down the country. And, of course, the worst challenges have been in poorer areas. I know that many other Members will want to speak of how their own councils have struggled with all those challenges while having to provide much-needed services during the pandemic.

In addition, local authorities have had to rise to the challenge of making up for the fact that the Test and Trace system has been inadequate. It is funded by the £12 billion provided to Serco and other private contractors, but local authorities have had to step in to serve their communities and make it work. They are taking on additional responsibilities because of the pandemic but not getting the necessary funding. The Government promised to provide that funding and it is falling short.

Although I welcome the £3.2 billion of emergency funding and the £300 million of funding for clinical commissioning groups, that still leaves a shortfall of billions of pounds, which is putting local authorities between a rock and a hard place. Labour, Lib Dem and even Conservative-run councils are struggling to balance the books. Some are going bankrupt or have declared bankruptcy. That is a big worry for communities, given that local authorities are on the frontline, cleaning the streets, looking after those who are vulnerable, dealing with the pandemic and providing support, including to the police service, which has experienced cuts, with 20,000 officers taken out of the system over the last decade. In reality, this means that communities such as mine in Tower Hamlets have faced £200 million of cuts over the last 10 years.

The extra costs of covid mean that a further £30 million will have to be found; otherwise services will have to undergo dramatic changes, which will have a damaging effect on people by 2024. At the same time, demand for services has grown. At the height of covid, my area also experienced the fourth highest age-standardised death rate in the country. The health inequalities and other factors that make people vulnerable mean that our local authority has to work closely with other agencies and their resources to protect people. Their actions have saved lives. There would have been an even greater number of deaths if local authorities and partners had not done that work, but they cannot continue to do it without support from national Government.

On education, schools are suffering and need support. Local authorities have worked closely with them to provide that support, but they need funding, as we saw in this summer’s debates about holiday hunger and child poverty. My local authority stepped in a long time ago to help keep children fed, but the food bank queues are astonishing. I would welcome the Minister visiting some of the food banks in my constituency. I joined others in visiting Bow food bank recently. The number of people using it has increased dramatically. They are not the usual suspects who need help because they are extremely vulnerable; middle-income families are also struggling because of covid, employment issues and lack of support. The need is greater, but the funding and resources are not there.

Other services under threat—and not just in my constituency but up and down the country—include those for young people with special educational needs and disabilities and those for young vulnerable children. It cannot be right that, in addition to the double whammy of the coronavirus pandemic and long-term funding cuts, the future life chances of the most vulnerable are being further damaged. We need the Government to act and use tomorrow’s spending review announcement to make sure that local authorities get the support they need to protect our communities.

I am sure that the Minister will say that there are limited resources. Of course there are, but the question is how the money is being used. We have to ask this. Is it right that, for instance, the towns fund—the NAO and others have pointed this out—which is more than £3 billion, is allocated in the way it has been rather than by focusing on indicators of need? That cannot be right. That kind of favouritism is what breeds distrust. It smacks of pork barrel politics and is absolutely unacceptable. How money is allocated and spent is crucial. Of course, there have also been scandals about personal protective equipment and other scandals.

It is right to say that the Government need to refocus their resources in a way that is fair and appropriate, because many local authorities and not just mine—Sunderland, Knowsley, Sheffield, Gateshead, South Tyneside, Oldham and many others—desperately need additional funding but are not getting it. I could go on, and I am sure other hon. Members will, about the number of local authorities that need support but are not getting it.

We need the Government to think quickly and act quickly to ensure that local authorities get the support that they need. If they do not, we will face, in the middle of a second wave of coronavirus—in the middle of a crisis like no other—more lives being put at risk not only by of the pandemic but by the failure to address the secondary effects of extreme vulnerability through local action and support, because local authorities will not have the capacity and resources to act.

I hope that the Minister will take on board my concerns and those of others about children and young people, adult social care and the wider issues of the underfunding and neglect of local government, which is at the frontline of delivering services and does not get the recognition and credit it deserves for the work it does. These are decent public servants who work very hard to deliver for our constituents. We need to back them up and support them, because if we are to fight and win the battle against the coronavirus pandemic, we are going to need them even more than ever before. We are also going to need a collaborative effort from the private and the public sphere to deliver implementation of the vaccine, as well as to improve testing and tracing, on top of all that they already do.

I hope that in today’s debate we can build consensus among Members of all parties to make the case for local government, because it is absolutely at the heart of addressing not only the challenges we face with the pandemic, but the long-term challenges of tackling inequality and genuinely fighting to level up. If the Government genuinely meant what they said in the election about levelling up, they need to put their money where their mouth is and deliver. I hope that the Minister will make that case later today to the Chancellor of the Exchequer, ahead of his statement.

[Mr Philip Hollobone (in the Chair)]

The debate can last until 4 pm. I am obliged to start calling the Front Benchers no later than 3.37 pm. The guideline limits are 10 minutes for Her Majesty’s Opposition and 10 minutes for the Minister, and then Rushanara Ali will have two or three minutes to sum up the debate at the end. There is a stellar cast of Back-Bench talent. Sixteen Back Benchers are seeking to contribute until 3.37, so if we have a time limit of three minutes, everybody should be able to contribute.

[Imran Ahmad Khan (Wakefield) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Bethnal Green and Bow (Rushanara Ali) for bringing to the House the issue of the adequacy of local government funding during the covid outbreak, as it facilitates a much-needed debate on both the role of local governments in the crisis effort and the broader interaction between local and national Government.

It was important that any central Government approach to crisis management throughout the pandemic was measured against three key performance indicators. The objectives were, first, to provide adequate financial support to ensure that crucial local government services could continue; secondly, to equip local governments with the tools and flexibility they required to adapt their services to provide targeted support in the relevant jurisdictions; and, finally, that any such support did not create a precedent that would serve to create a further burden on an already overloaded state apparatus.

The figures as of 23 October, without taking into consideration the latest round of business grants, highlight that in my constituency alone, Wakefield Council received an extra £41.52 million to support its efforts in tackling covid-19. This ensured that critical services could continue, despite decreased tax revenues and the higher costs incurred by the pandemic.

In April, £850 million of social care grants, for both children and adults, were paid up front to cover the period from April to June 2020. Although the figures provided by central Government may not have been delivered on a like-for-like basis, they have provided unprecedented sums of money to local authorities, facilitating their ability to use discretion in targeting the needs of their districts as they see fit.

In a crisis, ring-fencing funds for one service may not be appropriate when jobs are at risk and the landlord needs his rent paid, for example. Decisions were made on the best information available at one point in time, and further support was provided where required. One such example was the £617 million discretionary fund, which served as an addendum to the small business rate relief grant and retail, leisure and hospitality grants, and allowed local authorities to distribute further moneys as they saw fit to businesses in need. At the time, I suggested that any underspend from the small business rate relief grant and RHL grants should be combined with the discretionary grant, as a method through which individuals who had been defined as the economically excluded could receive much-needed support on a case-by-case basis.

[Mr Philip Hollobone (in the Chair)]

Order.

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[Stephanie Peacock (Barnsley East) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I begin by thanking and paying tribute to my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) for securing this important debate.

Day in, day out, our local authorities are on the frontline fighting the virus and providing essential services that we all rely on, from bin collections, street cleaning and libraries to children’s services, social care and homelessness support. I pay tribute to all council workers, especially those at Barnsley Council. During the pandemic, we have relied on them to rapidly reorient themselves in a way we could never have envisaged: being on the frontline of the fight against the pandemic as well as supporting their businesses and residents, all while continuing their everyday essential work.

For that, they were promised “whatever it takes”; they should do whatever was needed, and the Government would ensure that they were not left out of pocket. Sadly, the rhetoric has not been matched by reality, certainly not in Barnsley. Our council has done an exceptional job of supporting residents, but that has come at an expected cost at the end of March of £50 million, including around £34 million in support for the most vulnerable and social care and relief to support businesses. The council also estimates around £16 million of lost income from council tax, business rates and fees. The Government income compensation scheme is expected to provide only £2 million to cover that, with that shortfall leaving the council with a loss of £15 million. The Institute for Fiscal Studies estimated the figure nationally at £1.1 billion, and that was before the second national lockdown.

Of course, this follows a decade of austerity in which Barnsley received the biggest cut in Government support of any council in the country. My constituency cannot afford to be left behind by this Government for another decade.

[Mr Philip Hollobone (in the Chair)]

Because everyone has been so good in sticking to the time limit, we can increase it to three minutes and 30 seconds.

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[Naz Shah (Bradford West) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone, and I congratulate my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) on securing such an important debate.

I will start by paying tribute to the council staff across England who have worked so hard to keep our communities safe in difficult circumstances throughout this pandemic. I have seen at first hand the efforts of council staff workers in Bradford West from the very outset of this virus—the hard work they do to minimise and prevent the spread of infection, get help to the vulnerable and support the care sector, work to sustain our businesses and the economy, keep essential services such as refuse collection and bereavement going, and much more, including setting up local Test and Trace services before there was any commitment or financial support from the Government. That has been the case for councils up and down the nation.

However, local government is at a crossroads. A decade that saw £15 billion cut from local authority budgets has ended with the impact of covid-19 driving up costs and cutting income, leaving councils across the country facing huge challenges to set a balanced budget. Many of my colleagues have mentioned those budget cuts, particularly my hon. Friends the Members for Leeds North West (Alex Sobel), for Barnsley East (Stephanie Peacock), for Stockport (Navendu Mishra) and for Poplar and Limehouse (Apsana Begum). The numbers do not look good for any of those constituencies.

Without proper funding, there is a real risk that councils will not be able to balance their budget, as they are legally required to do. Councils do not want to have to make those hard choices, but they have been left with little choice by the Government. Vulnerable people across the country will suffer the most if councils are forced to stop delivering the crucial services they rely upon. The tragedy of this is that after a decade of austerity, councils will be forced to cut back on funding again. Additionally, it has been reported that the Chancellor is considering a public sector pay freeze. Can the Minister clarify whether he feels comfortable clapping public sector workers as we entered the pandemic, and cutting their futures as we start to come out of it?

Since the beginning of the pandemic, councils have sent detailed financial returns to MHCLG each month, so this time around, the Government cannot feign ignorance. Ministers know exactly how much local government is out of pocket by. Despite the fact that at the Government’s daily press conference in May, the Communities Secretary said he would “stand behind councils”, it is clear to leaders of those councils that that promise will not be kept. Nor is this a short-term issue that will go away after covid; these funding pressures are cumulative. Councils are losing out on fees and charges from sources such as leisure centres and car parking: as my hon. Friend the Member for York Central (Rachael Maskell) said, York has lost 8 million visitors due to covid-19.

There is no guarantee that there will be a return to normal next year, either, and it is not just me saying that. According to analysis by the cross-party Local Government Association, councils in England will face a funding gap of more than £5 billion by 2024 just to maintain services at current levels. The present national lockdown has no doubt made the funding crisis more acute. The same concerns have been raised by the Conservative-led County Councils Network, and the evidence from witnesses at the Select Committee on Housing, Communities and Local Government has been equally concerning. I also agree with the concerns that the chair of the all-party parliamentary group, the hon. Member for Waveney (Peter Aldous), mentioned earlier.

I hope that the Minister can provide some clarity about how the Government intend to deal with the huge challenges facing local government, and that he will be able to answer some questions. However, before I get to those questions, I want to talk about places of worship. My right hon. Friend the Member for East Ham (Stephen Timms) highlighted the role of mosques. I have seen at first hand the role of mosques in my constituency, but ahead of the spending review, I have also had some conversations with local churches. The churches, mosques and all places of worship in my constituency have already been picking up the pieces of 10 years of austerity from Government cuts, including through food banks; across the country, each church equates to £300,000. There has been no commitment to help where churches or mosques are picking up the council pieces. Can the Minister highlight what is going on with the funding allocated to places of faith?

I understand that the Prime Minister’s adviser, Sir Edward Lister, wrote to councils under tier 3 restrictions to advise that they would not be asked to set a balanced budget this financial year. Will the Minister clarify how that will work and whether it will apply to those councils that are subject to increased restrictions after 2 December? Will he also clarify how much has been paid to local government to date, through his Department’s scheme to replace lost income and fee charges? Will he say whether his Department is considering further financial support for councils returning to the higher tiers of local restrictions after 2 December? Can he confirm whether that will be based on need or per head of population?

The Transport Secretary highlighted today that the Government would not engage with regional Mayors as we enter the new tiered system. Have the Government abandoned their pledges on devolution, and should we expect further Whitehall rules for the future of this Government? Finally, will the Minister clarify when the local government financial settlement for 2021 or 2022 will be published? My hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali), who secured this debate, laid out very eloquently the challenges that are faced. Councils have to make a choice: will they cut library services, refuge services, frontline workers, bin collections—what will face the axe next? Councils are between a rock and a hard place when making these decisions.

We have already seen the fiasco where the Government took the decision to centralise Test and Trace and give the contracts to Serco. My understanding is that Serco did not even have any penalties in its contracts. In my constituency, and others I have seen with a high prevalence of covid-19, people have been door-knocking and managing to test, isolate and track people locally. They have managed to isolate outbreaks, but the Government are not putting their money where their mouth is. That is an added pressure to those that councils already face.

We have had 10 years of austerity, followed by covid and a Government who have gone into national lockdown instead of taking a circuit breaker, which we advocated. That has had even more of an impact on our councils. They really need certainty. In Bradford, our councils have already had so many cuts, as have the councils of every Member on both sides of the House. Nobody is denying that we have had cuts for the last 10 years. Will the Minister confirm that the Government will be putting their money where their mouth is? Did they mean it when they said, “We will do whatever it takes”? Will he give the councils that reassurance?

[Mr Philip Hollobone (in the Chair)]

If the Minister could finish his remarks no later than 3.57 pm, Rushanara Ali will have time to sum up the debate.