Funding for Local Authorities

Rory Stewart Excerpts

Thursday 10th October 2013 Commons Chamber

[Angela Smith]

My hon. Friend hits on a key point. That is why I mentioned the old pit villages in my constituency which even now carry the deep scars that were left behind, not just on the landscape but on the lives of the people who were, in effect, abandoned following the wave of closures in the late 1980s and early ’90s. People underestimate how difficult it is for an authority such as Barnsley to rebuild an economy that was built almost entirely in villages. It is not easy to rebuild that type of economic infrastructure once it has disappeared.

Local government provides many of the public goods that our constituents consume, whether they live in rural, suburban or urban areas. These include emptying bins, educating our children and picking up the pieces of shattered lives when things go wrong. Local government is the backbone of our civil society. There is no doubt, however, that it is approaching a crisis that is not of its own making, but that has been made in the offices of No. 10 and the Secretary of State for Communities and Local Government.

We have all seen the infamous graph of doom, which shows that councils will eventually run out of resources to run anything except the most basic of services. For my two councils that catastrophe will occur in 2018, when all discretionary spending will disappear and major cuts will have to be made to adult social care and other core functions. Councils up and down the country are being asked to do more and more, but with less and less resource.

In addition, it is clear that this Government decided early on to contract out many of their austerity measures for delivery to local councils across the country. The average cut to departmental budgets has been about 7% in real terms according to the special interest group of municipal authorities, but local authorities have seen their share of funding fall by 27% over the same period, with only benefits and welfare being cut more, which, of course, has in itself had a direct impact on demand for local authorities.

To compound matters for the core cities, while the average loss of Government support in England will be £240 per household in the years 2013-14 and 2015-16, the core cities will see a reduction of £352 per household. On the issue of rural and urban areas, metropolitan areas are bearing a large part of the local government reductions—much more than has been acknowledged so far in this debate—which is not at all helpful in terms of delivering for the rural areas in those metropolitan boroughs. That is on top of the already unequal cuts that core city authorities have experienced since 2010, which have seen them lose a third of their grants from central Government.

If that was not bad enough, these cuts have not been the end of it for many local authorities. The hidden cuts, including those major cuts to grants, are not so obvious to many of our constituents. For example, a £400 million cut occurred when council tax support was transferred to local authorities, and the cut to the early intervention grant removed £430 million at a stroke from local authorities. These cuts are now on a scale never seen before and they are having a chilling effect on local services.

Contrary to the belief of the Secretary of State, local government has not been a place of excess. In fact, it has been recognised for many years as the most efficient branch of government, and that makes it even more likely that cuts to its funding will have to come out of the services it provides.

[Rory Stewart (Penrith and The Border) (Con)]

Will the hon. Lady give way?

[Angela Smith]

No, because I have already taken up a fair amount of time due to interventions.

By the end of this financial year Sheffield will have made savings amounting to £182 million—about a third of its discretionary budget. As many will know, that is because the only part of the budget that councils can actually manipulate is relatively small. In the case of Sheffield, it is about 16% of the overall budget, meaning any savings have to be focused on that relatively small proportion of the available resource. That has had a huge impact on leisure, the arts and environmental and street scene functions. Indeed, the impact is being felt across the country, hence the campaigns springing up against library closures everywhere. In Sheffield it has led to the closing of Don Valley stadium, the removing of funding for leisure centres—the only two leisure centres in my constituency have both closed—as well as a significant reduction in library services and a move to fortnightly bin collections. The story is the same in Barnsley, with the £35 million removed from its budget leading to library and leisure centre closures and cut backs in grants to voluntary organisations and other vital services.

Our local authorities are becoming shadows of what they once were. Local people in my two boroughs are increasingly being asked to travel further to access services such as libraries and leisure centres at a time when funding for local bus services is also being cut by central Government. If this situation continues, how far will people have to travel, paying increasingly expensive bus fares, to get to the services they need?

As has been said, on 1 April the Government introduced the new business rate retention scheme, which fundamentally changed the way in which local authorities receive their resources. Although these changes to the new settlement funding assessment make it difficult to make a comparison between previous and future years, the end result for Sheffield and Barnsley seems to be the same—another round of cuts, with Barnsley having £40 million less to spend up to 2015 and Sheffield facing a further shortfall of £80 million up to 2015, rising to £106 million by 2018. To put those figures in perspective, £80 million equates to Sheffield’s current total spend on libraries, environmental heath, trading standards, refuse collection, crematoriums, street lighting, youth services and services to people with mental health issues.

The new settlement funding assessment, along with the retention of business rates, means that from now on the only way my two local authorities and many others can realistically grow their revenues is through growing the business rate income. Indeed, that is the exact intention of the Government’s thinking. That is great for Westminster, because companies are falling over themselves to locate there, but not so great for Barnsley, given the difficulties it faces. That does not mean that Barnsley does not want to compete or attract new business, or that progress has not been made, but it is hard. The borough, along with its neighbour, Sheffield, still has a long way to go. That is hardly surprising, given the deindustrialisation that it suffered in the ’80s. Even if businesses can be attracted, the work that is required to fill the economic gap left by the contraction of traditional industries is immense. To fill Sheffield’s £38 million funding gap for next year, the equivalent of two new Meadowhall retail centres would have to be built. That is a tall order to say the least.

I started my comments by saying that local government is important. It is also true that more and more people will require the services that it provides. Those who rely most on local authorities are the elderly, the young and the vulnerable. The possibility that councils will run out of money for all but the most basic of services is fast becoming a reality. As I said earlier, Sheffield will run out of money for all functions other than children’s and adults’ services, and will have to start cutting even those key functions, by 2018. Every day, I hear stories of vulnerable people being isolated more and more as councils pull out of the services that they used to provide. I fear the sort of society that we are becoming as councils stop providing the support that they have provided until now.

If the Government continue down the already well-trodden path of exporting their austerity measures to local authorities, many parts of the country will see local services cease. It is the most vulnerable, the elderly and future generations who will bear the brunt. It does not matter whether those people live in rural areas in Devon, Sheffield or Barnsley, or in metropolitan or urban areas—they will suffer.

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[Rory Stewart (Penrith and The Border) (Con)]

It is very easy to feel that the debate about rural and urban funding is somehow trivial or unjustified. Those of us on the Government Benches who have been fighting on this topic for nearly two years often face scepticism from officials and slight scepticism from Ministers. The implication is almost that what rural areas are asking for—0.25% of funding to be shifted year by year—is either based on faulty statistics or will have no impact. I wish to challenge that.

It perhaps feels from London as though the request we are making is very small. It feels like the tiny tip of a lever, but when the lever is 350 miles long and the fulcrum is right here in Westminster, that 0.25% makes an enormous difference, because rural areas are in an especially fragile position—more fragile than those in almost any other country in the world. This was, of course, the first country to industrialise, and the first country to develop a truly urban population. In the mid-18th century, a sixth of the entire population of Britain lived in London. As a result, this is not France; we do not have vigorous, rich rural communities and local democracies and huge local populations. We do not have, as they do in France, 10% of the total population working on the land. Instead, we have been struggling for a very long time.

We must add to that the current perfect storm, which is to do with not simply the Minister’s portfolio, but what is happening to rural areas in health, where we are being significantly underfunded, in education, where we are being significantly underfunded, and in terms of our demography: we tend to have an older population, and we tend to face greater struggles with fuel poverty, with unaffordable housing, and with problems that other colleagues have raised to do with bus services. The Minister is dealing with a situation that is extremely dangerous, therefore.

This 0.25% matters because rural areas are precious. They are precious and they are fragile, and they have never been so fragile. They are being depopulated; we can walk across the English and Scottish borders and see houses abandoned and see parishes that in 1850 had 2,500 people but now have just 300. In those valleys are the very last traces of our history and of our landscape, which we in this House do not wish to turn into a wilderness.

It sounds like a very grand statement to come down to 0.25%. It sounds as if it is perhaps being a little petty to say that rural areas should not make this small demand just because they pay more in council tax, receive fewer services and earn less. But it is a demand that is very consistent with the traditions of my party, of this House and of this country. What I believe we all share in this House is the sense that rural areas should not be seen as marginal victims. Just because we mostly live in cities and just because 97% of the population tend to live in more densely packed areas than almost anywhere else in Europe, we should not patronise those areas.

Eden district council is the most sparsely populated council area, containing the most sparsely populated parish in the whole of England. When we see the kinds of things that Gordon Nicolson, the wonderful leader of the council, or Councillor Kevin Beaty struggle with, we see that they what they are struggling with is not simply being victims, but the possibility of being the future of this country—somewhere we can be proud of, somewhere the Minister and everyone in this Chamber can visit, and somewhere where 9 million tourists a year come to see living Britain. They wish to see not a wilderness but a rich community of houses, schools and living people. On that quarter of 1%, I ask the Minister please to be generous.

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[Mr Walker]

My hon. Friend is extremely generous. I believe this campaign has strong support across the Back Benches. It is an issue that we can take forward; we must see real progress made on it. I am grateful for my hon. Friend’s comment, but it is, of course, a team effort in which many others have played their part.

In Worcestershire as in many other counties, the education department shares staff and resources with the broader children’s services area, so wherever education funding is under pressure, it places additional pressure on other aspects of children’s services, including looked-after children and safeguarding—issues raised by a number of Opposition Members. As a long-standing supporter of the f40 campaign and having met Ministers many times to discuss it, I know that reform of the school funding formula is on the way and I have every confidence that we will eventually get a fairer deal, but we need to learn the lessons of what seems to have gone wrong with local government funding and not repeat the same mistakes.

It appears that in this case the Government set out to correct some of the imbalance in funding for rural local authorities, but then introduced a damping mechanism that outweighed the impact of the change—effectively, as my hon. Friend the Member for Beverley and Holderness said, putting the whole thing into the deep freeze rather than simply damping it. In effect, a funding reform designed to move things in a fairer direction has been so watered down as to make the problem worse. That cannot be allowed to happen when it comes to school funding, and it should not be allowed to happen to the wider CLG funding for local authorities.

[Rory Stewart]

Would my hon. Friend touch, perhaps briefly, on health funding, which is one of the other great examples of this problem?

[Mr Walker]

My hon. Friend is absolutely right; it is exactly the problem I was about to move on to. As I mentioned earlier, health funding is another area of major concern. Rural areas tend to have higher numbers of elderly people and a higher life expectancy than the major cities. As so much health funding is allocated according to life expectancy and targeted towards areas of high perceived deprivation, it means that the population of big cities is generally much better funded than that of rural areas.

With an ageing population and more people living with long-term conditions that require regular treatment, this creates enormous pressure on all rural health services, particularly on community health services. Worcestershire as a whole gets lower health funding per person than do more urban areas of the west midlands, but it has an older population, placing greater demands on our health service. Shifting the balance of health funding from mortality to morbidity would help to address this, as would having a more activity-based formula for community health. In health as in education, however, the local structures do not exist in isolation from local government. There are close links between the health and the social care systems, while pressures on both the acute and the community health systems create additional pressure on local authority-run social care. The fact that we are underfunded for health means that our underfunding for social care is a more serious challenge for our local authority.

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[Brandon Lewis]

I am afraid that I entirely disagree. Having led a local council that, before my time, had seen council tax increases of 18% and 16%—they were regularly in the double figures—and in a country where council tax doubled under the Labour Government, I believe that hard-working people think that council tax should be kept low and that councils should be looking at how they spend their money, not just building up reserves and then pleading poverty. If they believe that they are short of money, they should use the reserves they have to invest for income in the future and make savings, as many good authorities are doing.

The hon. Member for Mid Dorset and North Poole (Annette Brooke), in a very strong speech, touched on the new homes bonus, as did a number of Members. It is an issue that we are looking at. There is a consultation at the moment and the Government will of course respond to it. The hon. Member for Easington (Grahame M. Morris) referred to fire authorities, but he should bear in mind that the response to the Knight review is coming. Fire authorities were protected in order to make some of the efficiencies that they should have been making but in too many cases were not.

My hon. Friend the Member for Penrith and The Border (Rory Stewart) outlined in his strong contribution—other Members also commented on this—how he thought the funding gap should be reduced. I say to my hon. Friend that the gap between rural and urban with regard to spending per head has reduced by 4%.

That leads me to an important point raised by my hon. Friend the Member for Beverley and Holderness (Mr Stuart) in his passionate speech. I thought I was doing well with his flattery and compliments, for which I am grateful. He was clearly being sincere until he mentioned the word “svelte”; I knew then that my ego was not being brushed in the way I hoped. My hon. Friend made a clear point about the analysis. While he was away after suffering an unfortunate injury, I met SPARSE and I would be happy to go through this again. We managed to clarify the difference between how it and the Government have calculated the figures. A rural area is different for the Government, because an area such as my county of Norfolk, which would usually be classed as rural, has within it urban areas such as Norwich, Great Yarmouth and King’s Lynn, and that gives us a slightly different calculation. I would be happy to go through the figures with my hon. Friend when we get to them in a few months’ time.

[Rory Stewart]

Will the Minister please consider the broader context? The county of Cumbria is losing £63 million from its health budget and another £1 million from its fire budget. These things cannot be seen in silos. They have to be put together.

[Brandon Lewis]

My hon. Friend makes a reasonable point. I will touch on how these things come together and the work we are doing to deal with that.

The hon. Member for North Devon (Sir Nick Harvey) made a passionate and strong speech about sparsity and disparity and how they need to be dealt with. My hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) made a powerful point about the chief executive of the Local Government Association, who is clearly disposed towards higher council tax charges for residents, which I think all of us—those of us on the Conservative Benches, at least—want to move away from while we keep frozen and low council tax. In some areas, good Conservative councils are even cutting council tax for their hard-working residents. I noted my hon. Friend’s comment about asset sales. I will look at that, and if he will bear with me I will get back to him on that specific issue.

My hon. Friend was absolutely right to mention incentives to pool and work together. We have put incentives in place and I will touch on them in a moment. Councils such as High Peak, Staffordshire Moorlands, Breckland and South Holland have just this week benefitted from those incentives and the money we announced.

My hon. Friend the Member for Beverley and Holderness continues to make a strong case on this issue. He has pushed it with other Members and comes to see me regularly. I have no doubt that our conversations will continue as we approach the financial settlement period over the next few months.

My hon. Friend the Member for Worcester (Mr Walker) and my hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips) highlighted the cost for rural areas, particularly with regard to transport. Members representing urban areas often mention issues to do with density and poverty and how they balance out. That issue has yet to be proven with regard to cost differences and we will continue to look at it.

I gently say to the hon. Member for Cambridge (Dr Huppert) that, if Cambridgeshire is so short of funding, he might want to ask how it could afford a huge pay-off and the rather interesting system it has used to reappoint the chief fire office of its fire authority. That happened in the past few weeks and it has raised a number of questions.