Local Government Finance

Clive Betts Excerpts

Wednesday 7th February 2024 Commons Chamber

[Jim McMahon]

I thank the hon. Member for inviting me to celebrate the success of Labour in Plymouth, and the work that our councillors are doing, after taking back control, to show leadership to the city. Plymouth is a proud place, and the Labour party there is making a huge difference. He may want to consult those on his party’s Front Bench when it comes to the submission of audited accounts, because there is an issue to reconcile here. Only 1% of councils have submitted accounts; how do we break through that bottleneck, given that the market is not responding? The Government will have to respond to that sooner rather than later. I politely advise him, if I may, to withhold his criticism, and to wait to see what his Government’s approach will be. I suspect he may be slightly embarrassed.

[Mr Clive Betts (Sheffield South East) (Lab)]

The Select Committee has written a report recently on local authority audit, which is a complete mess, with only 1% of accounts done on time. This is not a party political matter, as councils right across the country are struggling with this issue. One factor is low audit fees. Another is the complication of pension fund valuations, which is holding many accounts up. The likelihood is that the only way to get through that will be to agree accounts that are qualified because it has not been possible to confirm pension fund valuations. I hope that party political points are not made about councils and the qualification of accounts.

[Jim McMahon]

First, I thank the Select Committee for the work that it has done in this area. Last week, we received the report “Financial distress in local authorities”, and a great deal of work has been done to understand the detail and the contributing factors. There is no doubt that the accountancy regime for pension funds is a contributory factor to the delay in some cases. We need to know that councils are financially resilient, and that the financial settlement is robust. Where there are issues, an early warning system should allow them to be picked up earlier, so that if an intervention is required, it is made at the right time and in the right way, whereas now, section 114 notices are being issued at a rate not seen for the past three decades. That cannot stand, and it is not sustainable. We look forward to the Government’s response on that.

On the wider point about cross-party agreement, I think all of us and the Local Government Association, which is cross-party, would welcome with open arms the day when party politics was taken out of local government finance, and when there was consensus on how to fund local public services. I sincerely hope that after the next election, when those on the Government Front Bench are in opposition, they join us in that call, but let us wait and see.

The Government will know, as we do, that because of the financial fragility of local councils and the lack of an early warning system, it now takes only a small shock to send town halls into financial meltdown; the resilience just is not there. The Local Government Association has done a fantastic job in leading from the front and ensuring that adequate support is supplied when needed, but it cannot be expected to lead the charge on its own, nor should it be expected to. Councils need certainty and stability. They need to have the fear and anxiety of financial bankruptcy removed, so that they can continue to deliver for local communities. Councils need to be given adequate time to plan ahead for the fiscal year. Labour would support local councils where the Government have failed.

Single-year settlements do not provide the certainty or stability needed for planning ahead. We recognise that councils need something more than that to end this disjointed approach. Labour will embed transparency in the relationship between local and national Government, and move towards multi-year funding settlements for councils that allow them to plan well ahead. We will give towns and cities the tools that they need to foster local growth and deliver better public services. Should we be privileged enough to form the Government after the next election, Labour will empower councils to get on with the job that they have been elected to do.

Finally, we will see a radical transfer of power away from Westminster and into the hands of the British people through the landmark take back control Act, but we will not wait; where we can accelerate improvement, we will. We want a new relationship between central and local government as genuine partners in power. We want to see the right powers in the right places. Our communities are resilient, and so are our councils, but we need to do far more to work, hand in hand, as true partners going forward.

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[Mr Clive Betts (Sheffield South East) (Lab)]

Let me begin by thanking a few people. The shadow Minister, my hon. Friend the Member for Oldham West and Royton (Jim McMahon), referred to the report “Financial distress in local authorities”, which the Select Committee published last week and on which I made a statement in the House last Thursday. I want to thank the staff of the Committee and our special advisers for all the work that they did in helping to put the report together: it was much appreciated. I also want to thank the Local Government Association—I declare my interest as a vice-president—for all that it does for local government throughout the year, and for helping us and advising us on the challenges that local government is facing, not least with regard to finances.

The Under-Secretary of State for Levelling Up, Housing and Communities, the hon. Member for North Dorset (Simon Hoare), is sitting on the Front Bench. I want to thank him as well, not for providing enough money on this occasion—I would not go as far as that—but for being genuinely helpful and open in his willingness to be approached by Members on both sides of the House and to engage with local councils across the country. He has also been open to discussion and an exchange of views with me, in my capacity as Chair of the Select Committee, so I thank him for the way in which he has approached this matter on a personal basis.

The difficulty for councils is that they are not just dealing with what is happening this year; they are also dealing with the problem of the year upon year of austerity that we have seen since 2010. There is now a funding gap of £4 billion, which £600 million goes nowhere near filling. In fact, the Institute for Fiscal Studies said the other day that the gap was £7 billion, but either way it is a much larger sum than the £600 million that the Minister has made available. I was a little disappointed when the Minister for Housing, Planning and Building Safety, the hon. Member for North East Derbyshire (Lee Rowley) —who opened the debate—began referring to reserves again. When local government finance gets into difficulties, Ministers always resort to saying, “Councils have all this money, so why don’t they spend it?” I remember that when Lord Pickles was Secretary of State for Communities and Local Government, he was berating councils back then for not spending all their reserves. I think that most of them are quite grateful for not having done so, in view of what has happened subsequently.

Some councils have simply run out of money and have issued section 114 notices, while others are wary of what is coming. They can see things getting worse rather than better because that is what has happened year on year, and, rightly, they are not rushing to spend all their reserves at once. They are being prudent to a degree, but they can see those reserves running out in two or three years’ time, even if they are not facing section 114 notices immediately. We have heard from the LGA that about 20% of councils could be facing them in the next 12 months. It may not be as many as that, and everyone hopes it is not, but it could be a significant number. In the last six years eight councils have issued section 114 notices, effectively declaring bankruptcy, whereas in the previous 18 years, none did so.

It is not only individual councils that are experiencing difficulties. The whole system is now broken. That is the evidence that we were given: the Committee did not pluck the information out of thin air. We heard from councils of every kind—county councils, district councils, metropolitan councils, unitary authorities and London councils—and the problem is now widespread across all of them. Yes, individual councils have made mistakes, some of which have caused them to get into difficulties, but as we look forward, we see that it is not only the councils that make mistakes that will get into difficulties. Many will simply run out of money, and they will have no leeway to deal with any adverse consequences because their reserves will have been run down.

In fact, for the most part, councils have done brilliantly to survive this long. Credit is due to councils and councillors throughout the country who have managed to keep themselves going, and managed to make efficiency savings on a scale of which any central Government Department would be proud. Local government has seen bigger cuts in its budgets than any other part of the public sector. The temptation for Ministers is always to pick on councils, because they can blame them from the Front Bench for the difficult choices that have been made, and do not have to claim responsibility for the cuts.

My own city of Sheffield has experienced a 30% cut in its spending power, and of course it has cut services. Libraries have closed in my constituency, there has been less funding for tendered bus services, the grass is cut less often, and the planning department has fewer resources and wants more because of the number of planning applications being submitted for the redevelopment and regeneration of the city. Those are all consequences of the spending cuts. This is about the two things coming together: the cuts to resources and the pressure from all the things that everyone talks about, including social care.

Adult social care was seen as a developing problem, and it is. Another way of looking at it is as a great benefit, because people are living longer and they are here to need the care, which is absolutely wonderful, but now children in care as a demand is rising faster even than adult social care. The Select Committee looked at children with special needs, their education and the cost of transporting them, and there are things that can be done there that are not just about more money. It is about looking at the provision of care for children and looking at councils collectively providing that. We could get costs down in that way.

This is also about looking again at education, health and care plans. There is a feeling that sometimes the more well-educated, knowledgeable and affluent parents see the benefit of demanding an almost unconstrained amount of money for certain educational provision for their children. The cost of that is going up exponentially, and those plans have to be reviewed. Of course we have to give kids with special needs the education they deserve, but perhaps we ought to look at the system that is causing such a massive increase in the costs that are now occurring.

At the other end of this is the fact that the overall budgets have been constrained as demand has gone up. What about ordinary council tax payers? They are paying 5% extra every year. For the most part, those council tax payers do not receive adult social care, do not have a kid with special needs and do not require homelessness services—another area of increasing demand—yet they are being asked to pay 5% extra. They are also seeing their libraries and bus services disappearing and their streets not being swept as often. They are saying, “But I’m paying more every year and I’m getting less.” The system cannot continue in the way it is. It is a challenge to the basis of democracy, which is that people feel they are paying for something and getting it. Here, they feel they are paying more and getting less. That is not sustainable in the long term, as I think we can all see.

Another problem with the settlement is that it is for only one year. Local government has asked repeatedly for multi-year settlements, and we got there in 2016. Covid interfered with that, but there is no reason they could not have come back since then. We were also promised fair funding in 2016. What has happened to it? This settlement is based on data that goes back to the last century. That cannot be right either, can it? It really cannot be right that we are allocating money based on how many people lived in areas so many years ago that it now makes no sense because of the demographic changes that have taken place since. These are all issues that could have been addressed. They are big challenges but they could have been met.

We have not mentioned the public health grant today. When public health went over to local government, it was pretty well funded because it was linked to NHS settlement increases. Public health is really important because it looks at prevention in our most deprived communities, but there has been a 27% real-terms cut since it went over to local government. We do not use it enough. During covid, we should have used the expertise of the directors of public health for tracking and tracing, instead of the phone banks that were set up at national level at a cost of billions of pounds. The director of public health in Sheffield, Greg Fell, has sent me information about the cuts that he is dealing with. This is a fundamental issue of equality. Public health is about helping the poorest communities disproportionately, and that is now not happening because of those cuts. Yes, there is some welcome extra money for smoking cessation and for dealing with people with alcohol problems, but it does not fill the gap that has been created by the cuts.

Perhaps the Minister could have a word with the Chancellor. He probably cannot offer us any more than the £600 million today, but perhaps he could have a look at the household support fund, which our Select Committee has just written about. In Sheffield, the fund provides 32,000 children who have free school meals during term time with vouchers to compensate in the summer holidays. Have a look at that, as local authorities cannot compensate for it in the current crisis. It would not take a lot simply to keep the fund going from March, when it comes to an end. This is the last school holiday in which kids will get the funding. It is a small issue but, if the Minister adds his voice to those of the Select Committee and many others in this House, we might be able to get a bit of movement in the Chancellor’s upcoming statement.

Things are bad, but they could get worse and probably will. The Minister said it will be for the next Parliament and, yes, it will. The Secretary of State for Levelling Up, Housing and Communities announced more than a year ago that he would ask a Minister to review council tax, and I understand that nothing has happened yet. Council tax has not been touched for 30 years, and we cannot explain to people moving into a new build home how their council tax is calculated. It is based on the value in 1991, before their home had not been built. We can all see that it is nonsense, so we need reform. The Minister suggested the other day, and I agree, that whoever wins the election has to make local government funding, and certainly social care funding, stick for the long term. We had cross-party agreement on pension reform, and it has stuck for the long term, so let us look at both those issues. I hope we can then move on.

Finally, what on earth are the productivity plans? Does local government not have enough work to do without having to produce another set of plans for a purpose that only the Secretary of State seems to understand? I have read that councils apparently have to stop spending on “discredited” equality, diversity and inclusion programmes. Can anyone tell me what a discredited equality, diversity and inclusion programme is? Who is going to decide? Does the Minister have a little list of criteria and tick boxes? Is he going to review all these programmes, or is it just another attempt to say that councils obviously have plenty of money if they are engaged in these sorts of programmes? They have not. In my view, councils are engaged in providing proper, decent and needed services for their communities, and there are not enough of those services because of the spending cuts. I hope that in due course we can move forward to a better time for local government. Our councils deserve it and, even more importantly, our communities deserve it too.

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[The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Simon Hoare)]

It is a pleasure to wind up for the Government in this debate. I will just say gently to one of my shadows, the hon. Member for Blaydon (Liz Twist), that if the situation is as bad as she and the hon. Member for Oldham West and Royton (Jim McMahon) have painted it, I am surprised that with the exception of those on the Front Bench and the hon. Member for Sheffield South East (Mr Betts)—I know, as a former Select Committee Chairman, that one is obliged to take part in these debates when they relate to one’s Department—we have, against all this horror, had only one Labour Back-Bench contribution. I thank and congratulate the hon. Member for York Central (Rachael Maskell)—at least there is one Labour Member who is concerned about local government and who is not obliged to come and talk about it.

What an exciting prospect we have—the nation sits agog! After 14 years of opposition, a review to look at long-term plans is what the hon. Member for Blaydon tantalisingly holds before the House and the electorate. After 14 years of opposition, one has to ask what on earth they have been doing with the time. A review to look at long-term plans! As always, the Labour party is quick to critique and slow to deliver. What a contrast to the speeches we have heard from Conservative Members.

[Mr Betts]

I take the Minister back to the beginning of the debate, when the Minister for Housing, Planning and Building Safety talked about doing a long-term review of local government finance in the next Parliament. The difference, of course, is that the Government have been in power for the last 14 years and could have done something about it.

[Simon Hoare]

The hon. Gentleman and I have discussed this on many occasions, and I know he broadly agrees with me on this point. Local council chief executives and leaders would have come at the Department with pitchforks and flaming torches if we had dumped a 200-page consultation document on their desks at a time when they were rallying to support their communities during the covid crisis.

This year, as last year, the Government have rightly set our focus on stability, certainty and security. I believe this local government finance settlement delivers on all three.

[Simon Hoare]

No. If the hon. Gentleman is not here for the opening, he cannot take part in the summing up. He has tried that trick before, and it did not work then.

As we heard from the hon. Members for North Shropshire (Helen Morgan), for Sheffield South East and for Blaydon, some of these issues came through in the consultation and in the engagement: support for special educational needs; a long-term view of adult social care; and reform to the funding formula, which so many hon. and right hon. Members have referenced. A reformed funding formula would provide stability and security to our local authorities, and the best way to deliver it is through cross-party working. That is what this House owes them.

When I was asked to take on this job, I had no idea of the complexity and time required to arrive at a local government finance settlement. I thank all colleagues who came along to take part in my parliamentary engagement, which was hugely helpful. I pay tribute to my private office and to officials in the Department—long hours, huge work. I pay particular tribute, not least because her note tells me I have to, to Victoria Peace for all her hard work, as well as to Kate, Nico and others. It has truly been a team effort.

I also thank the Chancellor of the Exchequer and the Prime Minister for listening to the case that the Secretary of State and I took to them on revising the formula. We said that we would listen, we did and we have acted. Those are the hallmarks of prudent, listening, caring, one-nation conservativism, and it is writ large in this local government finance settlement.

I also pay tribute, as so many others have, to the work that councillors and council officers do, day in and day out, to deliver to make the lives of some of the most vulnerable people in our society more bearable and a little better, and to create a sense of place in which people wish to live. We salute all of them. Are all of them brilliant? Of course not, but not all of us are brilliant either. But I know that, day in and day out, they focus on doing their best.

I have been called many things, but the hon. Member for Sheffield South East called me “genuinely helpful”. My hon. Friend the Member for West Dorset (Chris Loder) called me “the great rural tsar” and a “knight in shining armour”. And my hon. Friend the Member for St Austell and Newquay (Steve Double) called me a “warrior” for rural councils. I am grateful for those comments, and I look forward to their being carved into my headstone in due course.

[Mr Betts]

Not too soon.

[Simon Hoare]

Not too soon, I hope.

I could bore the House with the figures for the local authorities of each Member who has contributed, but those figures are on the public record. They are all going in a positive direction. I think we have started to make significant inroads into addressing those concerns, by turning our thinking to the common themes that have ranged through this debate. The trajectories on SEND and adult social care show no sign of abating, and we need a long-term solution. The formula does need reforming and the Government are committed to doing just that in the next Parliament.

I say to everyone that the transformation and productivity plans, which we see as a key part of the settlement, are all part of underscoring that “Agenda for Change” is a process, not an event; it has to be iterative and organic, because, as my hon. Friend the Member for St Austell and Newquay mentioned, we have no money and councils have no money save that which we raise through the taxpayer. We have a duty to ensure that we deliver the biggest bang for each and every buck.

My hon. Friends the Members for Hastings and Rye (Sally-Ann Hart) and for West Dorset, the hon. Member for Somerton and Frome (Sarah Dyke), and my hon. Friends the Members for Loughborough (Jane Hunt) and for Waveney (Peter Aldous) all made important points about how the formula review must ensure that we take into account the differentials in the demand of need in delivering services in a rural or coastal area. I do not believe that we would be right in any definition of the term to say that “need” in an urban area outranks that in a rural or coastal area, or vice versa. Need is need and our local authorities want to play their part in making a difference on that. My hon. Friend the Member for Loughborough was not the only one, but she was right to mention the need for other Departments, when they create a new burden or duty on local authorities, to take into account the budgetary impacts that those services have, and I certainly take that on board. My hon. Friend the Member for Hastings and Rye made that point as well and I agree with all who have made it.

The hon. Member for York Central asked a specific question about the flood recovery framework and business rates. I am delighted to confirm to her that 100% business rate relief is available to business for a minimum of three months where they have been flooded and that that relief can continue to an agreed date until the business is able to be reoccupied for trading. I hope that that gives some comfort to her and to her constituents who have suffered from flooding issues in the recent time.

A lot has been done, services can continue, but the need for reform, cross-party working, blue skies thinking and significant change remains. This settlement is a generous one, with more than half a billion pounds or, I should say, “just” half a billion pounds, available for children’s services and adult social care. My hon. Friend the Member for West Dorset has long advocated for the rural services delivery grant and that is up now to its highest level, at £115 million. I know that rural councils, including that of the hon. Member for North Shropshire, will have welcomed that as a useful means of supporting their services.

We understand, applaud and appreciate the important contribution that councils make across our country, and the difference they deliver for their communities. We understand and are going to work with the sector, sector leaders, council leaders and others to ensure a bright, secure and stable future for local councils. We are providing a £600 million uplift, and, on average, a 6% to 7% increase in core spending power for most councils. This is a fantastic opportunity for councils to continue to deliver and for us to support them. I close with the point that many have made: we will deliver better for our constituents when central and local government work in partnership, matched horses pulling in the same direction, serving our communities and making a vital difference for those who need it. I commend the settlement to the House.

Question put and agreed to.

Resolved,

That the Local Government Finance Report (England) 2024–25 (HC 318), which was laid before this House on 5 February, be approved.

Resolved,

That the Referendums Relating to Council Tax Increases (Principles) (England) Report 2024–25 (HC 319), which was laid before this House on 5 February, be approved.—(Simon Hoare.)

Resolved,

That the Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) Report 2024–25 (HC 320), which was laid before this House on 5 February, be approved.—(Simon Hoare.)

Business of the House (Today)

Ordered,

That, notwithstanding the provisions of paragraph (14) of Standing Order No. 80A (Carry-over of bills), the Speaker shall put the Questions necessary to dispose of proceedings on the Motions in the names of:

(1) Secretary Michelle Donelan relating to the Data Protection and Digital Information Bill: Carry-over extension; and

(2) Secretary Alex Chalk relating to the Victims and Prisoners Bill: Carry-over extension not later than one and a half hours after the commencement of proceedings on the Motion for this Order; such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved; proceedings may continue, though opposed, after the moment of interruption; and Standing Order No. 41A (Deferred divisions) shall not apply.—(Penny Mordaunt.)