Local Government Finance (England)

Robert Neill Excerpts

Wednesday 9th February 2022 Commons Chamber

[Sir Robert Neill (Bromley and Chislehurst) (Con)]

I fear that, in local government terms, I am perhaps in the same vintage as the right hon. Member for Knowsley (Sir George Howarth) and have perhaps also experienced the Palmerston effect over my years in local government finance. Since I was elected to Havering Council in 1974—as a very young man, I might add—the nature of the finance settlement has changed and things have come and gone. We had the rate support grant and then the block grant, then we had standard spending assessments and then the revenue support grant, and there were any number of combinations thereof. The one thing that has been constant is that nobody has ever been satisfied with the settlement and, almost by its nature, nobody ever will be.

I remember, in the days when I was a young councillor, the late Lord Healey, when he was the Labour Chancellor of the Exchequer, telling the local government sector that “the party is over”. The difficulty of getting the balance right in the funding of the local government element expenditure from the centre has bedevilled Governments of all parties. In a sense, it is a problem that will always be there while we have the highly centralised local government finance system that we have in the United Kingdom. That contrasts with the much greater levels of financial and, indeed, fiscal devolution to be found in local authorities and the local government sector in the rest of Europe and in the United States. That is a long-term issue; I know my right hon. Friend the Secretary of State is up for long-term issues and imagination, so hope he will take that away for the future.

If it is really to be delivered, it seems to me that levelling up can be sensibly achieved only if we look at fiscal and financial devolution as well. I commend to my right hon. Friend and his Minister the excellent work done by the London Finance Commission—I must admit to having served on one of its iterations—which was set up by the then Mayor of London, who is now the Prime Minister, so it has good provenance for the Minister to look at it in those terms.

The Secretary of State will remember that he and I dealt with local government when he was a rising young shadow Minister in the 2005-2010 Parliament, and I know he takes a real interest in the subject. When subsequently I was a Minister, it was generally delegated to the junior Minister to make the local government financial settlement statement, perhaps because there was less generous news to be given than is the case today. Nevertheless, I am delighted that the Secretary of State has been able to bring us some positive news in person. We can, of course, all make the case, genuinely and on a cross-party basis, that we would like to see more for our individual local authorities and for the sector, but it is noteworthy that London boroughs—including my local authority, Bromley—have seen a real-terms increase of 4%, which is a significant difference from the situation that has pertained in the past. For a number of reasons, I will say that it is not enough, but I recognise it as a step in the right direction.

I take on board the point that has been made by other Members that that increase is welcome, but in the long term we need, as well as a much deeper reform of the system, to move away from single-year settlements, because they make it extremely hard, even for the best organised of local authorities, such as Bromley, to plan on any long-term basis. No business would operate on the basis of single-year financial planning and we need to move back to multi-year settlements as soon as possible. I know that my right hon. Friend the Secretary of State will be well seized of that point.

The hon. Member for Sheffield South East (Mr Betts), the Chairman of the Select Committee, made a number of important points and speaks with great wisdom on these matters. I join him in commending the work done by officers and members in local government, with which I have always been proud to be associated. The chief executive of Bromley Council, Ade Adetosoye, was recognised by the Prime Minister in the Chamber on his appointment as a Commander of the Order of the British Empire for his transformational work, but many hundreds of thousands of others in local government are doing their bit, and we ought to salute them and the elected members who do a lot of hard work at the grassroots.

On where we should go forward from here, may I posit some observations from the point of the view of the London Borough of Bromley, a well-run, low-cost—I will return to that—and efficient authority. It is the only London borough to be entirely debt-free, but also it levies, I think, the second-lowest council tax in Greater London. That is not helped by the precept from the Mayor; it would be even lower without that. It is also an authority that has matched the reductions in expenditure from central Government and gone further with its own cost savings through an innovative approach to the way it delivers its services, to outsourcing and to investing wisely to generate income from its significant reserves, all of which have seen it through difficult times. It is a model of how a local government ought to be run, but none the less it faces very significant cost pressures.

One of those pressures is that we have the highest percentage of over-65s in Greater London. The population of Greater London has grown by more than 1 million, but in many of the outer boroughs the demographic change includes a mixture of young families moving in from the centre in one part of the borough and a static, ageing population at the other end, which creates pressures on both the schools and adult social care elements of funding at the same time. In Bromley’s case we have an additional factor, which is our proximity to inner London. A raft of other changes—the benefits cap and so on—has undoubtedly put pressure on a borough where the journey from Bromley South station to Victoria station takes 20 minutes, so there are considerably increased pressures on our homelessness budget as well. The difficulty of any formula-based system—back to my point about devolution—is that it is never easy to pick up all the nuances that any local authority will have. That applies even within London, never mind across the country.

The position I hope that the Minister might be able to move to is this: social services and the NHS are intimately connected. We had a further statement earlier today about integration. Although there has been a significant increase in funding for the national health element and the services it delivers, the local authority social services element of the same population—we need both elements to support the growing elderly population—has not had an increase in funding to the same degree. We can therefore get the bizarre and perverse situation where the ability of NHS funded services to help people is compromised, because there is not the same level of care when patients leave hospital and go back into the community. I hope that we can consider a better approach to joining up and better aligning the funding from those two elements.

Bromley, by the way, has done pioneering joint working between the two. I hope that the Secretary of State might like to come down to Bromley at some point—he has many fans there—and see on the ground what is being done. In particular, I commend the point made by the Chairman of the Select Committee, the hon. Member for Sheffield South East, about the importance of not losing in these reforms the place-based element that we see from clinical commissioning groups. Our CCG and our Bromley place director, Dr Angela Bhan, are absolutely magnificent at pushing that local element, and we do not want to lose that in the reforms.

Although we recognise that the capping of care costs and the fair cost of care reforms represent additional funding, there are considerable additional commissioning costs that first would have to be taken onboard. There will also be significant reductions in income further down the track from the reforms. Therefore, we need to look at smoothing out fairness of funding overall. Bromley’s overall estimate is that the changes will bring an additional funding burden of more than £10 million per annum, which is not currently covered. We need to find means of addressing that funding gap, and since that comes from a central policy, they ought not to fall upon the taxpayer.

The other issue that we need to look at is the public health grant, which has remained flat in real terms over three years. As we move to a post-covid situation, there will be long-running consequences, not least the impact of long covid on some of our population and many other things that will need to be picked up. We need to look again at how we deal with that.

Another element that is not directly within the local government finance settlement but that I hope the Secretary of State, as a former Education Secretary will take on board, although it is not in the general fund, is the shortfall in funding through the dedicated schools grant, particularly to meet special educational needs. That will create a deficit situation for Bromley and many other London boroughs and local education authorities in future years, as part of demographic changes. There have been some changes: the tightening of the ring fence on the dedicated schools grant, and introducing a statutory override last year. That was helpful, but it is not a long-term solution.

I hope that we can press ahead, as a Government, with the SEND review, and therefore find adequate funding to go with it. There is a particular perverseness that while some of the increased cost pressures on children’s social care can be funded, SEN transport is not funded from the dedicated schools grant. Since they are all part and parcel of the same package of the child’s educational needs, it seems strange that, although we can cover the cost of the education itself, we are not able to cover such costs out of the same pot.

I hope that we can look at the way the system operates. We need a system that rewards efficiency. We do not have any financial mechanism at the moment that rewards efficient, low-cost authorities such as Bromley. When I was a Minister in the Department, I was told politely by one of my officials, “Surely, efficiency is its own reward, Minister.” That is nice, but it does not really help when trying to balance the budgets and not pass on unfair costs to council tax payers.

We need a system where behaviour that leads to long-term efficiency and saving, as Bromley has demonstrated, is incentivised and rewarded within the local government grant system, until we move on to something more sophisticated in future. I was never able to crack it, and the then Secretary of State, the noble Lord Pickles, was never quite able to, although we made efforts, with the Localism Act 2011 and the Local Government Finance Act 2012. Perhaps the Secretary of State will be able to go further than we were able to, to reward good behaviour by elected members in a way that is demonstrable to their voters and communities. That, surely, would be a worthwhile thing to achieve.

We need to look at area cost adjustments. Bromley has one of the lowest area cost adjustments for the London area. The way that London property markets and other costs have shifted over recent years is such that there is really no distinction to be drawn between the costs of delivering services in Bromley, and, say, Richmond and Kingston in south-west London, which are much better compensated by the area cost adjustment. We need a review of how that works. I also hope that we can look at giving local authorities more freedom to raise and spend their own resources across the piece.

I mentioned the homelessness budget. Our difficulty, which I must say links to planning, is that there is pressure on housing, for the reasons I have set out. Bromley is willing to build new housing in the right place—the right place is important. Even with planning reforms, however, the private sector either is now too expensive for low-income households—in areas such as ours, it is usually taken up by young professionals who work in the City or the west end and are not yet able to get a mortgage—or falls into the lower grades of accommodation, if I may put it that way, with houses in multiple occupation that are not suitable for families and that we would not wish to see families in. We need to join up all the policy areas of housing, planning and local government funding to ensure that we do not create a perfect storm and leave families falling through the gaps in the system. That is part of the reason that Bromley has significant pressures on its homelessness budget, which as an outer London borough it had not had previously.

Finally, we expect Bromley’s population to grow above the national average, but funding is not currently being relocated on the basis of population growth. Surely, with our much better technology to store data, we could be more fleet of foot in updating these things. We have a projected increase of 18.9% in over-65s, compared with 12.1% in the rest of London. That will be a problem across the country, but surely we must make cleverer use of our data to update the figures on which we base the payments made centrally.

I could say much more, but for the sake of time I will not. I commend to the Secretary of State and the Minister the London Borough of Bromley’s 13 January submission to the consultation on the provisional settlement, in which Mr Peter Turner, our excellent director of finance, sets out many of the issues in detail. I would be happy to meet the Secretary of State and the Minister to discuss in more detail how a good and successful local authority can come up with ideas to help the system to work even better.