Somerset Council: Funding and Governance

Sarah Dyke Excerpts

Tuesday 30th January 2024 Westminster Hall

[Sarah Dyke (Somerton and Frome) (LD)]

It is an honour to serve under your chairship, Sir Mark. I thank the hon. Member for Yeovil (Mr Fysh) for securing this really important debate. I agree with him on many of his observations about our wonderful county that is Somerset and, indeed, the opportunities that it offers.

Local authorities exist to provide crucial frontline services to their residents. Some 63% of Somerset Council’s budget is spent on children and adults who need council care, but the stark reality is that the funding model is broken. As a proudly active Somerset councillor, I have seen the situation at first hand. The Government have decimated council finances and local communities are paying the price. This is a national problem that requires a national solution; it is not specific to Somerset.

Somerset Council has declared a financial emergency. It did so late last year because of the significant pressures on its finances due to sky-high inflation, spiralling costs of providing services, especially in social care, and a broken system for the funding of local government.

The council has been completely transparent about the measures that it has taken to address the £100 million funding gap for next year and will do what is necessary to continue to provide those essential services to its residents. I know that most of Somerset’s MPs have met Councillor Bill Revans and the Somerset Council team to learn more about the financial emergency, but sadly the hon. Member for Yeovil has not yet been able to find time to do so. However, speaking to the council’s leader this morning, I found that the offer of a meeting still stands, and I would be happy to join him if he wishes to meet Councillor Revans.

The hon. Member will be aware that some of the issues facing the current administration are the legacy of the previous Conservative council. Vesting day for Somerset Council, the new unitary council, was on 1 April 2023. The previous administration’s One Somerset business case stated now that the seemingly meagre £18.4 million-worth of savings would be realised after three years, not within nine months of forming a new council. The previous administration was guilty of irresponsible fiscal decisions. Six years of council tax freezes from 2010 reduced income from council tax, a move that saw a minimum shortfall of £24 million per year and delivered a total cut to services of £150 million.

During this period, central Government reduced the council’s revenue support grant, leaving councils more dependent on council tax and business rates. In 2018, the council was close to bankruptcy, which is why Somerset turned to the Liberal Democrats to sort out the mess.

It is important to note that Somerset has historically low council tax rates, compared with its contiguous councils, such as Dorset and Wiltshire. Somerset lost many of the higher-banded homes in Bristol and Bath areas to Avon in the 1974 reorganisation, and council tax then was set low in 1993 against the national average, all while the council tax itself is still based on the 1991 house values. This funding model is clearly unfit for purpose, and I do not believe that anyone would design a system like that now. Let me just add that there are now 18,000 homes with planning permission in Somerset caught in a moratorium due to the phosphates issue, which obviously has an impact on income that we would possibly then be able to draw down in council tax.

Where council tax income is lower, the need in the population is generally higher. Somerset is a rural county with an ageing population. The 75-plus age group is expected to double over the next 25 years. The cost of care in Somerset rose by 47% between 2022 and 2023, and the number of people needing more care is rising. That equates to a £70 million increase in council costs. There is an elephant in the room almost identical in size to the cost of living crisis that people face right now: fair funding from the Government to allow councils to get the basics right and give local people a fair deal.

It costs more to deliver services in rural areas, and the Government recognised that by altering the funding formula in 2013-14. However, due to damping, only 25% of the new benefit has been received by rural councils. Support from the Government does not match the increased cost, and the cost of years of underinvestment is now being felt by councils across the country.

Every single council bar the Greater London Authority is expected to experience a real-terms cut of at least 6.4% in 2024-25. That means that there will be a real-terms shortfall of £5.75 billion in council finances compared with 2016-17. The Government failed to get a grip on the situation early and now they are scrambling at the last minute to try to avoid a situation in which more local authorities go bankrupt.

Hon. Members from across the political spectrum have demanded action from the Government. Recently, I was pleased to join colleagues from across the aisle, including the hon. Member for Bridgwater and West Somerset (Mr Liddell-Grainger), in signing a letter that called for urgent additional funding for local government.

The previous Conservative leader of Somerset County Council, as it was, also previously called out this Government for leaving needs in social care unmet, and advocated for immediate investment. I was glad to see that the Government had listened to those pleas, but the extra funding announced last week is simply inadequate to quell the oncoming costs. It is like a rugby team converting a penalty in the 81st minute when they needed to score a try to prevent a crushing defeat.

We are all seeing councils that are close to the cliff edge; unfortunately, some have tipped over that edge. The situation is hurting residents and communities. I urge the Government to provide more funding to support councils as a matter of urgency, while allowing them increased powers to deliver for their communities and to reform business rates to boost local economies. The Liberal Democrats would provide additional funding by reversing tax cuts for the big banks, which could raise £18 billion over five years. We would also look at implementing a proper windfall tax on the oil and gas giants, and we would collect more of the £36 billion of tax that goes uncollected every year.

I have experienced—indeed, I continue to experience—the privilege of working in local government. I have seen the impact that local government can have on our communities and I am determined to defend it, but we need a Government to listen and to help turn the tide against this crushing wave.