Local Government Finance

Steve Double Excerpts

Wednesday 22nd February 2017 Commons Chamber

[Sajid Javid]

Again, I thank my hon. Friend for the role he has played in making sure that this issue is looked at properly. As he will know, the commitment we have made on business rates retention, which we want to start in the financial year 2019-20, means that there will be a requirement to have the proper baseline set for all local authorities before that system can be properly brought in. I hope that that gives him some comfort on the timing that is necessary given that the two things—the fair funding review and the business rates retention plan—are very much interlinked. There will be various staging posts on the way. As always, I am more than happy to sit down with him to take him through those and discuss this further.

[Steve Double (St Austell and Newquay) (Con)]

Much of what my right hon. Friend is saying is music to my ears as well. Does he agree that this is exactly the right time to address the issue of fair funding, because if unfairness gets baked into the system with the retention of business rates, it will basically be there for ever? It is vital that we get this right now, before the retention of business rates goes ahead.

[Sajid Javid]

My hon. Friend is right. As we move to 100% business rates retention and the requirement for local authorities to be more self-sufficient, it is right that we have the correct baselines, and that necessitates a proper review of needs for all areas, including—of course—our most rural areas.

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[Mr Thomas]

I am glad the Minister got to his feet, because I was coming on to his performance yesterday in Committee. Given the deep and profound concerns about the business rates revaluation, it was a little surprising for the Secretary of State to send out his Minister to reject the idea that any change to business rates was necessary. His spokesperson was still being quoted yesterday as claiming that business concerns were just scaremongering.

In 2005, PricewaterhouseCoopers tracked the tax liabilities of Britain’s biggest companies and found that half of the total came from corporation tax, while just 11% came from business rates. Today, corporation tax has fallen to 19.7% of tax paid by the top 100 group of companies, while the figure for business rates is 21%. Moving away from taxing revenue and profits, and increasing the tax share on businesses more reliant on bricks and mortar is surely going in the wrong direction given the rise of the digital economy.

I welcome the Secretary of State’s decision to have a review of the support for small businesses hit hardest by the business rates revaluation. I look forward to him being able to instruct his Minister, and encourage his hon. Friends, to support the amendment we have tabled to the Local Government Finance Bill on Report, requiring a full review of business rates and their impact on local government finance before the Bill comes into effect.

[Steve Double]

I just wonder whether the hon. Gentleman is able to clarify something for me. He has consistently said that he supports the 100% retention of business rates for local councils. However, he seems to advocate lower business rates for businesses and more money for local councils, which does not seem to add up. Where will the money come from?

[Mr Thomas]

As we have gently suggested before in this Chamber, we simply do not think it is the right time to cut corporation tax for businesses like Amazon, Sports Direct or Britain’s biggest banks. It is important that we get business rates right, because from April 2019 local government will be increasingly reliant on that income stream to fund vital public services. Since the Conservative party came to power, funding from central Government has been cut by over 40% and they want to axe the revenue support grant completely. Councils will spend some £10 billion less on England’s local public services this year than they spent in 2010-11. Ministers have never denied the Local Government Association’s calculation that local authorities are facing a £5.8 billion gap by 2020 just to fund statutory services.

Today’s settlement represents a further cut in councils’ core spending power. Not a single extra penny of new money for local government has been found for the care of Britain’s oldest and most vulnerable citizens. Some £4.6 billion has been axed from social care budgets since 2010. More than 1 million English adults, people who have served our country and deserve to be treated properly and with dignity, are estimated to have unmet care needs, which is a remarkable, almost 50% increase since 2010. The crisis is having profound consequences for the NHS and forcing councils to axe funding for other vital local services to enable them to provide even the most basic service to the most vulnerable.

Last July, the Association of Directors of Adult Social Services warned of serious problems in social care, but the Secretary of State did not act. In October, the Care Quality Commission said that adult social care services were at a “tipping point”, but the Secretary of State dismissed it as an exaggeration. There were briefings that action would be forthcoming in the autumn statement, but that came and went. When the statement on local government finance came around in December, all we were presented with was money being moved from one council funding pot to another and permission to raise council tax quicker than before.

The social care precept raises vastly different sums of money in different areas and is completely unrelated to need. It shifts the burden of solving a national crisis on to hard-pressed local councils and local residents, including all those only just managing to make ends meet. Members from all parties have called on the Government to act. The Chairs of the Health, Communities and Local Government and Public Accounts Committees have called on Ministers to act, yet the crisis has just got worse. The Association of Directors of Adult Social Services and the head of the NHS have also called on Ministers to act, while Age UK says that the English social care system is facing complete collapse.

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[Steve Double (St Austell and Newquay) (Con)]

I am delighted to contribute to this important debate. I welcome the presence of the single representative of the Liberal Democrats, the right hon. Member for North Norfolk (Norman Lamb); they were late to the party today, but it is very good to have them here eventually. They tell us so often in Cornwall how important they think local government is, but that has not been reflected in today’s debate, sadly.

Local government is on the frontline of delivering services to our residents. I know that from my time as a Cornwall councillor and from the sheer weight of correspondence I get in my office about things that are actually delivered by our local council, whether it is picking up the dog mess, cutting the grass and filling the potholes, or more important issues such as adult social care. We must value local government, therefore, and see it as a central part of delivering services.

It is also clearly right that local government is going through a period of dramatic reform. We need to bring it into the modern age, drive out the inefficiencies and the waste so often found in local government, and make sure that it is fit for purpose and as well-run as possible.

[Norman Lamb]

I really appreciate the welcome the hon. Gentleman gave me. Does he agree with the Rural Services Network, which believes that the impact of the changes for predominantly rural councils, compared with urban councils, is

“not only discriminatory, but also unsustainable for rural local authorities”?

That will have a particularly pernicious effect in counties such as Cornwall and my county of Norfolk.

[Steve Double]

The right hon. Gentleman might have been reading the notes of my speech, because that will be my main point.

We undoubtedly need to reform local government, and I broadly welcome the changes the Department are introducing to the way local government is financed, making it much more directly accountable for raising and spending its own finance and far less dependent on central Government. I also welcome the renewed interest in the Rural Fair Share campaign to address the imbalance that has existed for far too long between the levels of funding received by rural councils as opposed to predominantly urban councils.

[Jo Churchill]

rose—

[Steve Double]

I will not take any further interventions, as time is short.

Local government spending still accounts for a large proportion of central Government spending, and it is understandable that we have had to make savings and cuts while we have been dealing with the legacy of the huge and record deficit we inherited from the previous Labour Government. We have had to find those savings across government, including local government. That is the context in which we must see the current situation.

However, I welcome the Minister’s confirmation that a fair funding formula for rural councils, based on the cost of delivery and need, will be brought forward. My concern is about the timing of bringing the review forward. I remember standing on this very spot in last year’s debate, and at the last minute the then Secretary of State provided some transitional funding to ease the huge cuts that rural councils faced, to make sure that the funding gap between rural and urban councils was not further extended.

On that basis, I supported the Government position last year, with the promise that this would be looked at. It is disappointing that we are here again 12 months later and so little progress has been made in addressing the issue. I welcome the fact that some transitional funding is still available for this year, but that will run out next year and there will be no cushion to ease the impact on the rural councils and the widening of that gap.

We must urgently bring forward this review and address this issue. As I said to the Secretary of State earlier, if we do not deal with it now, the unfairness and the lack of funding for rural councils will be baked into the system when we go to 100% retention of business rates. So it is important that the review is brought forward. We can no longer live with what we in Cornwall would call a “dreckly” approach. For the uneducated, that describes something that will happen at some undetermined point in the future. It is a bit like mañana, but not quite so urgent. It feels as though that is the approach that has been taken with the fair funding review, but we need to get on with it. We need to stop talking about it and actually deliver this for our rural councils as a matter of urgency.

I am happy to say that, based on the fact that last year’s funding agreement was a four-year agreement and the fact that the majority of councils have now set their council tax, I will support the motion and the Government’s position tonight. I will do so with a heavy heart, because I am disappointed at the lack of progress that has been made, but I take the Minister and the Secretary of State at their word when they say that these issues will be addressed. I will continue to make this case as strongly as I possibly can and to work with colleagues to ensure that the unfairness that has existed for far too long is addressed so that our rural councils will be much more fairly funded in the future.