Local Government Funding: Rural Areas

Drew Hendry Excerpts

Monday 11th January 2016 Commons Chamber

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

The issue of local government finance, particularly in rural areas, is close to my heart, having served for eight years as a councillor prior to my election to the House. Having been leader of the opposition and then council leader on the Highland Council, an authority roughly the same size as Belgium, I have seen my share of financial challenges on both sides of the local debate, and I have great sympathy with right hon. and hon. Members discussing cuts to the budgets of English local authorities.

I would like to take a moment to pay tribute to the men and women who work across our councils. They deliver far more than many people appreciate, often in difficult circumstances, sometimes in distressing situations. Their help is there from before birth, throughout childhood and is weaved into our daily lives. It is even called upon when we die and in support of those left behind. In the light of the recent floods, special mention should go to those council employees across Scotland and the other nations of the UK who went above and beyond the call of duty to assist those in need. The scale of the flooding was exceptional, and the response in Scotland was truly first class.

Local councils, emergency services and other responders worked tirelessly to minimise the impact on communities, to ensure the safety of people and to help local areas to recover. To help them, the Scottish Government had already announced nearly £4 million for the local authority areas most affected by severe flooding caused by Storm Desmond in early December. This week, the First Minister has also announced that in the light of recent events the Scottish Government intend to make a further financial allocation of £12 million, meaning £1,500 per household and an additional £3,000 for businesses severely affected.

Since 2008, the Scottish Government have provided funding of £42 million per year to enable local authorities to invest in flood protection schemes. In my constituency, the Inverness flood relief scheme was successfully completed last year and has not only provided vital protection for Inverness, but regenerated the city’s riverside.

The Scottish Government provide funding to the Scottish Flood Forum to work with local authorities, communities, householders and businesses to help them recover from a flood event. A scheme in Whitesands in Dumfries is now included in the published flood risk management strategy for the Solway, and funding will be available to the council via the local government settlement to begin work on a scheme when ready. Funding for the flood forecasting service run by the Scottish Environment Protection Agency has been protected by the draft budget settlement. That is provided directly by the Government and is in addition to the grant in aid that is provided to SEPA. Today, the Scottish Government flood risk action plan was announced, with 10,000 properties being supported by investment of £235 million.

The Scottish Government also activated the discretionary Bellwin scheme in November and December. That exists to give special financial assistance to local authorities as a result of their providing relief and carrying out immediate work due to large-scale emergencies, including flooding incidents. The Scottish Government have also recently legislated to give councils the power to reduce and remit rates bills, which councils could use to target support to the businesses in their areas affected by the floods.

The Scottish Government are investing in rural communities, are seeking to provide better transport infrastructure, and better access to medical care and hospitals, and are mitigating the cuts made by the UK Government with a new rural fuel poverty taskforce.

[James Cartlidge (South Suffolk) (Con)]

The hon. Gentleman mentions fuel poverty. This is interesting. If there is one gleam of light for my constituents at the moment, it is the fact, as I have found recently, that if people fill up their oil tank—many rural constituencies use heating oil—the price is less than half what it was not so long ago. However, the fall in the oil price will have had significant implications for Scottish funding. I wonder whether he would care to reflect on that. He talks about UK cuts. What sort of cuts would have had to follow in the event of independence with the current forecast for the oil price and oil revenues in Scotland?

[Drew Hendry]

This is a common red herring that is introduced into the debate on Scottish funding. Scottish GDP is roughly the same as English GDP, and oil is a bonus for Scotland. When the price goes back up, obviously, the Treasury will continue to benefit from that bonus.

One of the first things that the Scottish Government did in 2007 was to decentralise local government funding by removing ring-fencing. Today, I am delighted to confirm that the Scottish Government Community Empowerment Minister has announced a £500,000 fund for a pilot scheme for people to take part in participatory budgeting in rural areas, giving people a direct say in how investment should be taken forward in their communities.

Health and social services in Scotland are to be delivered in partnership between health boards and local authorities. The Scottish Government are also taking action to support rural hospitals in recruiting and retaining their medical staff, ensuring that patients receive safe care. In some areas that will involve rotating staff between rural and urban hospitals to ensure that we continue to provide services close to communities. That work has already delivered early success in supporting general surgical services in Belford hospital. Working with NHS Highland, the Scottish Government are now putting in place a network between Caithness general hospital and Raigmore hospital in Inverness, rotating staff between the two hospitals. This will support the delivery of the majority of surgical care and all out-patient care close to the community in Wick, while NHS Highland engages with local stakeholders to develop options for high-quality, safe and sustainable services throughout Caithness.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

The hon. Gentleman has mentioned medical recruitment and retention in Scotland. I do not wish to reflect on the challenges that we have in England, but there are challenges in Scotland in psychiatry and general practice recruitment that are probably worse than those in England. Will he please reflect on whether the increased funding settlement in Scotland compared with that in England is beginning to bear fruit, or whether the challenge has actually worsened over the past two or three years under the current measures?

[Drew Hendry]

Funding for Scotland has been drastically reduced over the past few years. We recognise the fact that we need more medical professionals, and that is why a comprehensive support package for training is in place in Scotland.

The Scottish Government have also committed to working with local authorities to develop stronger and more productive relationships between central and local government in order to develop real benefits for the people of Scotland. The Scottish budget for 2016-17 for local government has taken place against a backdrop of the toughest public expenditure conditions we have faced. This is the austerity of choice not of necessity, and it has been rejected wholesale by the people of Scotland. Between 2015-16 and 2019-20, Scotland’s total budget will be reduced by 4.3% in real terms. Scotland’s total discretionary budget will be cut by £1.2 billion in real terms, or 4.2%, and funding for day-to-day public services —the fiscal resource—will be cut by almost 6% in real terms, or £1.5 billion.

Between 2009-10 and 2014-15, Scotland’s budget has fallen by around 11% in real terms, with capital expenditure falling by around 34%. This means that our budget has been cut by a staggering £3.5 billion in real terms since 2009-10. As a result of the autumn statement, the Scottish Government’s revenue budget will be cut by 5.7% in real terms over the next four years. However, Scottish local government finance settlements have been maintained on a like-for-like basis for the period from 2012 to 2016, with extra money for new responsibilities. This has resulted in a total settlement of £10.8 billion in 2014-15 and more in 2015-16, allowing rural local authorities and others to perform their duties.

Additional funding has been made available for health and social care, local authority school budgets and support to ensure that the council tax freeze is maintained for its ninth consecutive year. I have to say I agree that once we let the genie out of the bottle and increase council tax year on year, that is exactly what will continue to happen: it will increase year on year. The sum of £70 million is included in the settlement to continue the council tax freeze for a ninth consecutive year, which in turn continues to fully fund local authorities for the moneys that would have been collected by raising the council tax.

While I am on the subject of the freeze on council tax, it should be remembered that before the Scottish National party came to power and agreed the freeze with the councils, this most regressive of taxes had been going up every single year. That was hitting the poorest households and pensioners the hardest. During the 2007 election campaign, I knocked on the door of a constituent in Fort Augustus who was in tears at the thought of yet another pressure on her household purse because of the threat of an increase in council tax.

This measure has now saved the average family some £1,500 at a time when they find themselves most under pressure. Those advocating a return to increasing council tax should remember that that would be likely to result in a return to the yearly default of ever-higher council taxes, with services remaining under pressure due to the UK Government’s austerity obsession. This tax is applied not only to those who can afford a little bit more but to those who cannot withstand yet another squeeze on their ability to put food on the table or to heat their homes.

The net revenue reduction for local authorities next year will be £320 million. That amounts to a reduction of 2% of the total expenditure of local authorities. It is a challenging settlement. However, that does not take account of the additional allocation announced by the Deputy First Minister of £250 million for social care.

[Geoffrey Clifton-Brown]

The hon. Gentleman mentions a reduction in local government revenue support grant of just 2%. I do not know whether he was in the Chamber when I intervened on my hon. Friend the Member for Beverley and Holderness (Graham Stuart) in his excellent speech to tell him that my local authority of Gloucestershire was likely to face a reduction of 30% this year. Does that not wholly demonstrate what a generous settlement Scotland has had?

[Drew Hendry]

It wholly demonstrates the fact that the Scottish Government prioritise local authorities to ensure that they have the ability to deliver the services that they need. I have listened carefully to the complaints being made in the Chamber, and I absolutely agree that some of the cuts being faced by English local authorities are devastating. That is why I am proud that the Scottish Government are prioritising these measures.

The net revenue reduction will be £320 million, but that does not take account of the additional allocation of £250 million for social care. Previously, it has been the sole responsibility of local authorities to fund social care. The national health service will now share that responsibility and will next year invest another £250 million in those services.

The funding settlement also needs to be seen in the context of further funding for local authority school budgets. The budget sets aside funds to ensure that we are progressing the work to close the attainment gap. The £33 million that will be invested next year is part of a bigger programme of £100 million that is being invested over and above local authority school budgets to prioritise improvement in attainment.

Let us compare the situation of Scottish local government with that of English local government. The funding for English local government has gone down by 27% over the past two years while Scottish local government has essentially had a flat cash settlement from the Scottish Government for a number of years. So we are starting from a much higher baseline figure for the provision of local authority services. This underlines the SNP’s commitment to supporting local government.

--- Later in debate ---

[Sue Hayman]

Absolutely. Our difficulty in accessing decent broadband acts as another block on enabling rural businesses to develop and grow. That reduces access to increased business rates, as we have heard.

[Drew Hendry]

The hon. Lady is indeed making some fine points and I agree with many of them. Does she agree, though, that the issue is not just rural broadband and accessing those services? She made the point about rural businesses. In many rural areas, they cannot even get a mobile phone signal. That further hampers rural communities’ ability to do business and look after themselves.

[Sue Hayman]

That is correct. I do not get a mobile signal at home, so I understand that point. Another point that has been made to me by a number of rural businesses recently is the inability of people who have gone to markets to sell, for example, to use the hand-held card things because they do not have the signal to be able to operate them. I do not know the technical term, but that causes them problems when they try to sell.

In conclusion, I would like to ask the Government to look again, as other hon. Members have requested, at the way the funding is allocated. Robust rural proofing must be applied to all funding formula decisions right across Government to ensure that we have equality of treatment and sustainability of services.