Funding for Local Authorities

Stephen Phillips Excerpts

Thursday 10th October 2013 Commons Chamber

[Mr Stuart]

Average earnings in rural areas are lower, not higher. It is a myth; there is no rural idyll. In truth, the areas around Withernsea, Patrington and other villages contain people on similarly low incomes to those in the hon. Gentleman’s constituency in east Hull, but who spend a much higher percentage of their income on transport. They are suffering too, and local government funding starts from a much lower base. Is the population more or less resilient? In my constituency, the population in rural areas—in marked contrast to the hon. Gentleman’s constituency—is much older. There are vulnerable elderly people on low incomes who are remote and without access, and who have a council with massively less funding to deliver services.

In no way do I seek to suggest there are not serious social problems in east Hull, or that such problems could be of a different character to those faced by people in Beverley and Holderness. My hon. Friend the Member for North Devon thinks we were too modest in our request, but we are saying that the rural penalty of 50% more per head going to urban areas than goes to an older population with lower incomes in areas where services are more expensive to deliver is just not right.

I have always said that if someone showed me the evidence base that such a system is just, I would not, on behalf of my constituents, love it, but I would hear the case. However, no one, including Ministers in this Government and the previous one, has ever sought to do that because there is no justification for it. If we look at the cost of emptying the bins, supporting domiciliary care for the elderly population and so on, current differences between services that are comparatively well funded in Hull and less so in my patch cannot be justified. However, the point is to avoid a battle or denial of the genuine issues that the hon. Member for Kingston upon Hull East (Karl Turner) faces in his constituency, and to seek to move to a more needs-based system, grounded on people’s real lives, rather than an argument based on a high ideological point.

I have probably already spoken for half the time I am allowed, and I shall seek not to be like some hon. Members who ignore strictures from the Chair and carry on regardless. I know that the person in the Chair will not allow such a thing to happen. However, I make no apology for repeating that, on average, rural residents earn less than those in cities, and they pay council tax that is £70 or £80 higher per head—if we add up the people in each household who pay council tax, it is significantly more, yet urban areas receive Government grants that are 50% higher than those in the countryside.

Last year I led a delegation of rural MPs to meet the Prime Minister. We spoke to him and were delighted. There was no transformation, but perhaps hon. Members remember the summer—the beautiful summer of 2012 with the Olympics, good will; London Underground staff were nice. It was an astonishing and remarkable period. The capital was covered in magic dust. It was lovely. At that time, the Government suggested that they recognised rural sparsity. They did not go all the way we had hoped, but there was a movement in the right direction after years of it being skewed the other way.

Colleagues have said that it was damped away, but it was not damped away—it was stuck in a deep freeze. Damping is a transition mechanism. I would like the Minister to justify the fact that a transition mechanism has been used to shove an inequity that the Government recognise into the deep freeze.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

For seven years.

[Mr Stuart]

As my hon. Friend says, they have shoved it into the deep freeze for seven years, to 2020. The Prime Minister and the Deputy Prime Minister have been led to believe that there is no fundamental injustice, which they repeat, but the Government recognise the injustice. Perhaps it was just the magic dust, but they saw the injustice last summer. By Christmas—poof!—it had gone. Remarkable! They damped it away, which is inexcusable and cannot be defended.

That is why I am delighted to see this brave and excellent Minister in the Chamber, a man who effortlessly survives a reshuffle, who grows in power and influence, and who works for an even wiser and more sagacious man than he—the Secretary of State. It is those two honest fighters for truth and decency in whom I put my trust, almost entirely. There is no need to nudge such fine people, but if a nudge were required, I can tell my hon. Friend that, as far as my office knows, 115 constituencies have parliamentary petitions calling for a 20% reduction in the rural penalty from 50% to 40%. Many colleagues have spoken today, but many who are not in the Chamber are strongly onside with that campaign. No nudges whatever are necessary to Ministers such as this one. However, I say to him that the patience, even of the most trusting and loyal people such as the hon. Members to whom I am referring, can know a limit. We do not want it tested. We want the Government to do what they said they would do last summer, when the magic dust reigned. Can we return to that?

The Minister smiles, and I trust in him to do the right thing. We cannot allow the freezing of that injustice and inequity until 2020. Having a slow unwinding of a situation that the Government have recognised is wrong will not undermine the move to business rates retention. I therefore hope he does not repeat the suggestion that it will.

I have one final request of the Minister before the end of my speech—I have not quite had my 10 minutes. Will he produce an analysis of the rural/urban funding split? The Rural Services Network, which we work with, has worked hard attending meeting after meeting. The Minister has been in meetings in which he has asked civil servants to produce such an analysis, but for some unknown reason it never quite comes out. I would like to ensure that, whatever the Government decide, we are at least technically on the same page and can agree on where the money goes, as in the percentage that goes here or there and the amount per head, using whatever classification he wants, as long as it is on a rural/urban split. So far, we have heard the Government say, “We don’t split it like that. We don’t recognise your figures.” We ask, “Are you saying that our numbers are not true?”, and the Government say, “We don’t split it like that,” which is nonsense. We now have such experienced and first-class Ministers in the Department that we can expect action. I want to ensure that we are on the same page technically, then we can have the political argument on the right thing to do. All hon. Members, whichever constituency we represent, whether it is Kingston upon Hull East or Beverley and Holderness, want a just settlement that ensures we have decent local services and that supports people, not least those with least.

[Stephen Phillips (Sleaford and North Hykeham) (Con)]

It is a pleasure to follow my hon. Friend the Member for Beverley and Holderness (Mr Stuart), not only because he made a powerful speech, but because he is the co-chairman of the rural fair share campaign. I am sorry that he is still co-chairman: I had hoped that by now he would have lost his job. I say that not because he does not do a great job, but because I too remember the magic of last summer—the sun shining in the sky, the London Olympics, and the promises from the Government and their recognition that communities such as the one I represent have had a raw deal for far too long. Public services in Lincolnshire and many other shire counties cost at least as much, if not more, to run than they do in urban areas, but urban areas receive this fantastic extra grant from the Government of 50% more per head, while those on the lowest incomes can be found in the rural communities we represent.

Like every other MP with a rural constituency who has spoken, I tell the Minister that we have to do something about this. It does not matter who has been in government, this injustice has gone on for far too long. Our constituents do not deserve the thin services that the hon. Member for North Devon (Sir Nick Harvey) mentioned, any more than constituents in urban areas deserve them. We deserve precisely the same public services and I therefore support in full the campaign that the hon. Gentleman and his colleagues are running and to which I have signed up. It is time that this injustice was removed.

I have nothing new to say to the Minister other than what has already been said. Every hon. Member has recognised that we are in difficult financial times—times of austerity—and has taken solace from the fact that the vast sums of money that were poured into local government evidently did not deliver brilliant public services because the removal of those sums, as we now know from the BBC/ICM poll today, has not made people dissatisfied with the local public services they receive. In those circumstances, in which local councils—especially in rural areas—have made the sacrifices, efficiencies and economies that they were asked to make, is it really too much to ask the Government to give them the settlements that they deserve year on year so that they can deliver the public services that constituents who live in rural communities deserve?

I venture to suggest to the Minister, sagacious as he is—

[Mr Robin Walker]

Good-looking!

[Mr Graham Stuart]

Svelte!

[Stephen Phillips]

Indeed, and the Minister is well able to survive a reshuffle, as we now know. I could praise him more, and if it would get us what we want I would gladly do so. I have nothing new to say to him, because the figures are available. These are the poorest communities in the country and they get the roughest deal. On average they pay £75 more per head in council tax than anywhere else. The Minister has to deal with this. He has heard the strength of feeling on both sides of the House—this is a cross-party campaign, as he knows.

Patience is wearing thin. If the Minister comes to the House next year with a settlement that is fundamentally unfair for rural communities, such as those in North Kesteven district council and in a small part of South Kesteven, and if the funding settlement next year penalises rural communities again, which are already hit hard by the cost of fuel given the amount of travel that people in them have to do, he will not have an easy ride. I very much doubt that he will even find support. Today he needs to stand at the Dispatch Box and tell the House that the magic dust of the summer of 2012 has miraculously been found again and that the damping that has been used to rob Peter to pay Paul, when we were promised so much last year, will be addressed and not entrenched in the way the Government currently suggest for the next seven years.

--- Later in debate ---

[Brandon Lewis]

I am about to turn to some more general points and I will touch on the damping issue.

I want to be clear that behind all our thinking is that it is vital for councils to continue to play their part in tackling the budget deficit we inherited from the previous Government, making sensible savings and delivering value for money for the taxpayer, as many good councils are doing. We are providing direct financial incentives for councils to promote growth and jobs in their area. This year’s local government finance settlement set out how authorities can now directly retain £11 billion-worth of business rates and keep the growth from them instead of returning them to the Treasury.

More importantly, and perhaps more relevantly to this debate and the points made by hon. Members from all parties, in the current settlement we accepted, based on the available evidence, that rural areas are comparatively underfunded. We have therefore ensured that there is proper recognition of the additional costs of delivering services in rural areas. We adjusted the relative needs formula to reflect those costs. That was one of only three formula changes in the settlement.

Members have noted the changes, but I will reiterate them. We have increased the weight of super-sparse areas in the formula; doubled the sparsity weight for older people’s social care and district-level environmental protection and cultural services; reinstated the sparsity adjustment for the county level; and introduced a sparsity adjustment for fire and rescue. As a result, funding per head has been reduced by less in predominantly rural authorities than in predominantly urban authorities within all classes. There was a 4% reduction in the gap between 2012-13 and 2013-14. I know that some Members have an issue with how that is classified and I am happy to meet them to go through that when the figures for next year are confirmed.

We listened to the representations of rural authorities on the provisional settlement in the debate earlier this year. That is why we provided a further £8.5 million grant to help rural authorities with sparse populations.

[Stephen Phillips]

North Kesteven district council received £38,000, whereas if the sparsity factors had been properly taken into account and not been damped, it would have received several hundred thousand pounds. I say to the Minister that £38,000 does not butter many parsnips.

[Brandon Lewis]

I do not know where my hon. and learned Friend buys his butter and parsnips, but I understand his point. The Government obviously have to ensure that there is not too much volatility in the system, but the comments on damping have been noted and I will return to them in a moment.

Hon. Members have spoken about incentives. Yesterday, I announced the successful bids to the transformation challenge award. Eighteen local authorities will share £7 million to look at ways of bringing their services and management together and working in innovative ways. We are showing clearly that councils will get what they make, rather than having to take from a begging bowl. We will reward councils that deliver. The new homes bonus and the business rates incentive scheme are part of that. Through the new homes bonus, about 40 councils saw an increase in their spending power this year. I note that one of those councils was Corby borough council, in the shadow Minister’s constituency. There are councils that need to be more efficient still. Some small councils need to do more to share their management and services. We are doing what we can to incentivise and support that.

We issued the “50 ways to save” document. I encourage councils to look at that to find more ways to save and to ensure that they are being efficient in the back office and in their services, and that they are using transparency to cut waste. The best councils are protecting the front line, including weekly bin collections, library services and meals on wheels, while getting rid of waste and inefficiency.

We are aware of the pressures that are coming. We therefore have a £3.8 billion pool of funding for integrated health and social care, a new transforming services fund, a programme that will review the pressures on children’s services, and new flexibility to use capital receipts from asset sales to fund one-off revenue costs for reforming services.

I have heard the clear and passionate comments that have been made today. We will consider them over the next few months as we approach the spending review.