Clive Betts
Main Page: Clive Betts (Labour - Sheffield South East)Local Government Finance (England)
Clive Betts Excerpts(8 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text
Greg Clark
My hon. Friend is right. It was a ludicrous situation, whereby local councils levied business rates, collected them and sent them to the Treasury. Local businesses felt that they did not have the same direct connection as council tax payers with their local councils. The best run councils have always had a high regard for promoting business in their areas, and it is high time that they were rewarded and backed for that. The reforms do that.
Mr Betts
As the Secretary of State knows, I agree with the proposition that it is important that councils can raise more of their finance locally. It is not a question of whether, but how it should be done. A crucial element is the needs assessment review, which will set the basis for the new system of 100% business rates retention for the future. How does the Secretary of State intend to go about that? Will he fully involve the Local Government Association? Will he consider any independent element to the review to ensure that it is not seen as some sort of stitch-up by Government Members to look after their areas and ignore areas represented by Opposition Members?
Greg Clark
The hon. Gentleman has known me long enough to realise that, when I approach something, I do it seriously and rigorously. I take representations from everyone who has a sensible view to contribute, and I will certainly do that from local governments of all types. I hope that the hon. Gentleman and members of his Select Committee will contribute, as well as hon. Members of all parties who have a great deal of experience and knowledge of their constituents’ needs.
Under the proposed settlement, no council will receive less than was stated in the provisional settlement figures. However, the transition fund will ease the change from a system based on central Government grant to one in which local sources determine a council’s revenue. The fund will be applied in direct proportion to the difference in the revenue support grant that would have been experienced. It is as straightforward as that, whatever the Labour party’s conspiracy theories suggest. Indeed, some Labour-led authorities, including Lancashire, made the proposal. The transition fund will ease the pace of reductions in the first two years of the spending review period, after which income from other sources will grow.
The local government financial settlement is always important. It is the statutory act that allows councils to set their legal budget for the year ahead—the budget to deliver the services that we and our constituents rely on. This year the settlement contains some particularly important changes: indicative budgets for the entire spending review period to make longer-term planning a reality; a big increase in funding for adult social care, which is one of our councils’ most important responsibilities; action to help rural areas and a commitment to all councils that the move to 100% business rate retention will be accompanied by a fundamental review of the needs-based formula; and transition funding to smooth the long-overdue journey from our over-centralised state to a future where all money that is spent locally is generated locally.
Multi-year budgets have been delivered, social care prioritised, rural needs acknowledged, a fair funding review launched, and the devolution of funding advanced, and I commend the motion to the House.
Mr Reed
That is a misinterpretation of what Labour council leaders are saying. However much the Conservatives think this pre-council elections sweetener will work, the Rural Services Network is clear that this political bung will not change the dire financial crisis facing even rural councils over the next four years.
Mr Betts
Has my hon. Friend had any indication from the leaders of metropolitan councils whether they think the new arrangements are fair? As I understand it, only three metropolitan councils will get any of the transitional funding, and two of them happen to be Trafford and Solihull—the only two Conservative metropolitan districts.
Mr Clive Betts (Sheffield South East) (Lab)
I want to try to be fair and even-handed in these matters, and I shall focus on the positive elements first. We ought to welcome the four-year settlement on offer, as it is something that local government has for some time been asking for. It is a helpful step forward, providing greater certainty for the future. We are not quite sure yet what efficiency plans local councils will need to draw up to achieve it, but it seems a good starting point.
I welcome the money for social care, too. It is reasonable, but I have some questions about how it is going to work. I have had an exchange of correspondence with the Secretary of State and with the Local Government Association. The LGA clearly says that it asked for more money than it has got on transformational spending and it states that this was not recognised.
I do not object to the fact—indeed, I welcome it—that local councils will be able to raise more money through council tax. It is right in principle for more local services to be paid for by local taxes. As a localist, I firmly believe in that.
Let me clarify the questions that still need addressing. First, the better care fund that is part of the package is very much back-end loaded in the spending settlement, but there are pressures at the front end, too. The Secretary of State claimed in his statement that the issue of the 2% council tax increase raising more money in richer areas would be addressed through the distribution of the better care fund. Will he put some clear information in the Library to explain how that is going to be done?
Barbara Keeley
My hon. Friend has raised a key issue. For two years, there will be hardly anything from the better care fund. There will a maximum of only £400 million this year from the 2% precept, nothing from the better care fund, and only £105 million from the fund next year. The funding gap is increasing by £700 million, and the Local Government Association’s Councillor Izzi Seccombe has asked for that sum to be released.
Mr Betts
That was the next point that I was going to make. The Government should consider how the better care fund money could be distributed in a way that would help more poor authorities, but it would also be helpful—I know that the LGA has mentioned this—if more of that money could be provided until at least 2017-18, if not into the next financial year. I hope that the Secretary of State will consider that, because current back-end loading is a real problem.
The LGA has drawn my attention to the fact that the council tax base—which relates to the number of properties from which council tax will be raised—is assumed to rise by 7.8%. Will the Government explain precisely how they have made that calculation? It seems a very big increase indeed.
What account have the Government taken of the ability of clinical commissioning groups to help local authorities with their social care spending? In my own authority of Sheffield, the CCG has said that it faces a substantial reduction in its funding against the anticipated level for next year, but this year it is providing the council with £9 million of transfer funding to help it with its added social care provision. If that money is removed, any element from the better care fund or increased council tax will not be a substitute. I think that that is an issue for cross-departmental work.
The settlement will clearly result in cuts. The Secretary of State will argue that they will be less severe than those made in the last Parliament, but, of course, they are in addition to those that have already been made. In the last Parliament, when most of the larger percentage cuts were made in the metropolitan areas, which had the greatest needs and the greatest problems, we never once heard mention of a transitional arrangement to provide extra help for those councils. It has only come about now because the Government have developed a core spending power which includes council tax, and the richer councils happen to be more able to raise council tax. As they have suffered a bigger reduction in revenue support grant as a result of the initial spending announcement, a transitional funding arrangement has suddenly and magically been put in place for them.
Greg Clark
I think that, uncharacteristically, the hon. Gentleman’s memory is letting him down. He should recall that, in the last Parliament, there was a series of tariffs and top-ups to stop the bigger cuts being made. That money was top-sliced from the settlement. What I have now been able to do—and this was recommended by many authorities, including Labour authorities—is bring in new money from outside the settlement, and the hon. Gentleman should welcome that.
Mr Betts
I think that in the last Parliament there was a series of ceilings and safety nets, which is traditional in the operation of local government finance. I do not remember any occasion on which it was reported to the House, after the initial settlement, that extra money had been found to help metropolitan Labour councils that were suffering major cuts.
What will happen when the transitional funding comes to an end after the first two years of the settlement? Will the money be found from somewhere else, or will it be absorbed into the new review of needs? The Secretary of State announced that towards the end of the settlement he would effectively end the arrangement for negative revenue support grant, which affected some authorities. Which councils will pay for that, or will the money be found, again, from outside?
The way in which the needs assessment review is carried out is absolutely crucial. The Secretary of State has promised to involve the Select Committee and the LGA. Will he consider introducing an independent element at the outset? Perhaps initial assessments could be carried out by a body such as the Office for Budget Responsibility or the Institute for Fiscal Studies, on a politically neutral basis.
How can we begin to assess this process when we do not know the details of many of the other grants? When, for example, will the public health grant be announced, so that authorities know what they have to spend in that regard?
Let me return to the subject of my own authority in Sheffield. Its spending power is to be cut by 4.3%, which is more than the national average of 2.8%. There is also to be a £25 million cut in its revenue support grant. The reality for Sheffield is another £50 million of cuts in services: cuts in rate support grant plus extra spending needs coming on stream will mean a £50 million cut in services.
This is a very challenging settlement, even for an efficient council such as Sheffield, of which we can be proud. Indeed, we can be proud of the whole of local government for the way in which it has dealt with very challenging spending settlements over a number of years. It has dealt with them in a very efficient way—better than central Government, by and large. However, the cuts that local government is now facing are on top of the cuts it has already had, and they are eventually going to mean more library closures, more run-down parks and a whole number of worsening services.
As Chair of the Select Committee, I want to end on a positive note. The Committee as a whole has said that we want to work closely with the Secretary of State when the new funding arrangements for the 100% retention of business rates are implemented at the end of this Parliament, to ensure that those arrangements are put in place in the best possible way.