Local Government Finance

Debate between Jim McMahon and Clive Betts

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.

Financial Distress in Local Authorities

Debate between Jim McMahon and Clive Betts

Thursday 1st February 2024 Commons Chamber

[Mr Betts]

I thank my hon. Friend for his question. The report says that not every section 144 notice can be blamed on the Government. There will be circumstances in which councils get themselves into difficulty, but what we have said is that there are general problems coming down for councils, which have been created by a shortage of funding. We did make reference to Bradford. Bradford’s problem is the young age of its population—the number of children. Children services are run by trustees appointed by the Secretary of State for Education. That body has demanded from the council an amount equivalent to about 50% of its council budget. We could get the ridiculous situation in which the Secretary of State for Levelling Up, Housing and Communities sends in commissioners to run services to try to find the money to pay the trustees who are appointed by the Secretary of State for Education. That does not seem a great way for local government to operate.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

I thank the Chair of the Select Committee for what I think is a very important report. I also thank the Committee members who have spent a significant amount of time getting under the skin of the issue. First, does he agree that, ahead of the scheduled finance settlement next Wednesday, the Government need to finally take responsibility for the financial crisis in local government? Secondly, does he share my concern that the breakdown in local government audit is contributing to the removal of the early warning system?

[Mr Betts]

I thank my hon. Friend for that question. Yes, it certainly is doing so. I have just produced a report about local government audit. There is a real problem there. If accounts have not been audited for three years, as in most cases, but probably longer in other cases, how on earth do we know what is happening in local council finances? Certainly, getting local audit on an even keel by the end of this year is very important, but where accounts are qualified, as they will be, councils should not be blamed for that; it is the problem of the local audit system, and we really must sort that out.

Local Government Finance (England)

Debate between Jim McMahon and Clive Betts

Monday 24th February 2020 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

First, may I congratulate the hon. Member for Cities of London and Westminster (Nickie Aiken) on what I thought was a really thoughtful maiden speech? It is quite telling when councillors come into this place. The experience and insight they bring, regardless of party affiliation, means that we are actually at one when it comes to the need for reform of local government. I very much welcome her contribution on that point.

I thank my hon. Friend the Member for Sheffield South East (Mr Betts), who is the Chair of the Select Committee, for the contribution he made and the insight he brings to this debate. He made it very clear, from information from the IFS, that we have now seen a 20% reduction in spending power since 2010. He asked the question that we all ask: if austerity is over, what does that mean in practice? Does it mean just that the funding cuts stop today, or does it mean that we will begin to rebuild what has been taken from many of our local communities since 2010?

My hon. Friend also laid out a statistic that was new to me—I was surprised by this, but perhaps I should not be so surprised—which is that 2.4 million cases have been linked to food contamination. No doubt a reduction in the number of our public health officials has played a part in that, but in England we are behind. In Wales, a takeaway has to display its food hygiene ratings on the door of the premises, as it does on online ordering platforms, in a way that a takeaway in England does not have to do. In addition to the need to rebuild our public health functions, we need to move forward and make sure we have mandatory food hygiene ratings so that people can make an informed choice about where they buy food.

As always, my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy) gave a real insight into the impact of cuts and austerity on her community. There are a staggering 848 looked-after children—almost doubling since 2010—with council services left at crisis point. There is a real tension: the Government have of course reduced the central grant and council tax is going up all the time, but the very councillors who are working to protect their community and their council often face the most criticism from local people for the very difficult decisions they have to make. That is a very difficult task for many.

My hon. Friend the Member for Harrow West (Gareth Thomas), as always, gave a London insight, painting a picture that we are not always used to hearing about in this place. We very much hear the story that London is thriving and the rest of England is really struggling, but we see real pockets of deprivation in this great capital that should shame us all. We are seeing every local authority really struggling to make ends meet and demand for services really going through the roof.

My hon. Friend also made the case, and I absolutely support this, for saying that we cannot believe that devolution in London has finished. The problem with devolution in England is that we look to London, and we discount it for the rest of England, believing that the job here is done, and it absolutely is not. If we look at devolution in our major cities around the world—New York, Tokyo and other places—we see real fiscal devolution and real law-making powers devolved to a local level, in a way that leaves London in the shadows. When we talk about levelling up, there is a need not just to talk about redistributing finance and capital investment, but about the powers needed across all our major towns and cities in this country to make sure that every community has the right to determine their own future.

My right hon. Friend the Member for North Durham (Mr Jones) was absolutely blunt in his assessment. It was interesting to hear the exchange across the Chamber on parts of that, but we can understand why tempers are so frayed on this fraught issue. How can it be right that 40% of a council’s budget—£232 million—has been taken away from local public services. In the midst of all that, when my right hon. Friend raises those issues and the impact on his community and reflects on the local authority’s difficulty in trying to balance the books, we have people who for reasons of cynical political game playing decide to make the local council the target, instead of laying the blame where it thoroughly deserves to be, which is of course with the Government who are pushing through those cuts.

My hon. Friend the Member for Enfield North (Feryal Clark), a councillor for 14 years, is also adding real quality to this place. We need more councillors coming here—maybe it should be a prerequisite of coming to this place, as perhaps then we would have a better quality of debate. The figure of £800 per person cut from that local authority is absolutely eye-watering. Although we bat around the numbers, as they are important, what this really means is that those essential services that make a place a decent place to live have been affected: the community centre is not open any longer; the library is now closed; the Sure Start centre that gave young kids the real start in life that they need is no longer there. A startling report today says that life expectancy is going backwards for women and is stalling for men. How can that be right? We are seeing a decrease that this country has not seen for 120 years. Why? It is because of the lost decade of Tory austerity. That cannot be right.

May I just place on record, as my boss my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) did, a tribute to the right hon. Member for Rossendale and Darwen (Jake Berry) for the work he did as the Northern Powerhouse Minister? One thing that I enjoyed about the right hon. Gentleman was that he knew how to take a good rebuttal, and the exchanges that we had were fun and in good spirit and were a good challenge. He worked hard behind the scenes to try to make progress on devolution, and I hope that continues.

My final point is that we cannot afford to continue this pressure on council tax. We all know that council tax is out of date, and maybe next April, when council tax revaluations turn 30, we can have a big party and crack open the sausage rolls, the prawn cocktails could come out and maybe a bit of fizzy orange, or perhaps we should look back and recognise that there has been a collective failure on council tax revaluation and the need to modernise. Governments duck this because it is not popular, but we now have a system that is very unfair.

How can it be right that over the last five years we have seen council tax increase by a third in England? That is not right. What would happen if income tax was increased by a third in the same period? What would happen if national insurance was increased by a third in the same period? What would happen if VAT was increased by a third in the same period? What would happen if fuel duty was increased by a third in the same period? And, God forbid, what would happen if beer duty was increased by a third in the same period? There would be a riot in the Strangers’ Bar as we speak. But of course there is not a riot over the council tax increase. Why? Because we can defer blame down to local councils, but it is just not good enough. Today we see that low-income families have 8% of their household income taken for council tax while that figure is only 1% for higher earners. That cannot be right. It is hugely regressive and it is getting worse with every year that passes.

If the Government really want to address this, it requires maturity. It requires a forward view and it requires a clear strategy that has to be more progressive and up to date, and must reflect geographical variations. It must also recognise that council tax has its limitations. Of course property tax is very important, but it cannot take the burden of adult social care and children’s services, and it cannot be right that our ability to receive adult social care in older age is determined by a house value 29 years ago, any more than whether a child gets the care that they need to protect them from harm is determined by the same measure.

We need to grow up on this; we need to tackle it, and we need a solution that puts councils in the right place for the long term.

[Mr Betts]

I agree with my hon. Friend. We need a separate funding stream for adult social care, as the two Select Committees recommended in the last Parliament. Also, my Select Committee recommended a review of council tax very much along the lines that the hon. Member for Cities of London and Westminster (Nickie Aiken) recommended, but the Government just dismissed it in their response and said they were not minded to do a review of any kind. Does my hon. Friend agree that that is disappointing?

[Jim McMahon]

It is disappointing, but is inevitable in a way, because there would be winners and losers—and, let’s be honest, the winners would be the poorest who have less agency to mount a campaign and the losers would be the wealthiest, the people with agency who can mount a campaign in objection to it, and the major right-wing newspapers will also mount a campaign against it. It will be called the garden tax, the conservatory tax, the porch tax, or the driveway tax, but it will never be a tax that is actually deemed to be fair. But that is what this country needs; it cannot be right in England that we carry on with such an unfair tax system.

If the Government want to be mature—if they want to look long-term, if they genuinely want to take the politics out of this, which is probably what is needed—I am sure our side would be looking to contribute to that, but if they want to wilfully ignore the impact on low-income families and on many local authorities now not able to fund decent local services, I am afraid they can expect strong opposition on this side.

European Union (Withdrawal) Act

Debate between Jim McMahon and Clive Betts

Thursday 6th December 2018 Commons Chamber

[Jim McMahon]

rose—

[Mr Betts]

rose—

Local Government Finance

Debate between Jim McMahon and Clive Betts

Wednesday 7th February 2018 Commons Chamber

[Jim McMahon]

I am pleased the hon. Gentleman asks that question. At that time, there was already an in-built deficit in the Budget because of the increase in the national living wage and employers’ national insurance contributions, so even within the £2 billion allocated there was a £1.3 billion in-year deficit, because of the need to make sure that the provider market could be sustained. That is my response. It is just not enough money. Everybody in the House and our communities knows that. It is just a shame that the Secretary of State does not carry the weight in the Treasury to get the money into the Department and out to councils and into our communities.

[Mr Betts]

The Local Government Association has calculated that there will be a £2.3 billion gap in social care funding by 2020, having taken account of the 2017 Budget increases, and there are similar figures from the King’s Fund. The National Audit Office did a report for the Communities and Local Government Committee looking at these figures and basically confirmed their accuracy. There is a real problem here that cannot be disguised and that will not go away without extra funding being delivered.

[Jim McMahon]

Those figures are absolutely right. The analysis from Age UK shows that 1.2 million people who would have been entitled to social care in 2010 are no longer receiving social care because of cuts to the eligibility criteria by councils.

Local Government Finance Bill

Debate between Jim McMahon and Clive Betts

2nd reading: House of Commons & Carry-over motion: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 23rd January 2017 Commons Chamber

[Jim McMahon]

I am going to make some progress, because it is the Minister’s birthday and he has cake with candles waiting at home. There are also a great deal of unanswered questions that he needs to address at the Dispatch Box.

[Mr Betts]

rose—

[Jim McMahon]

Given my hon. Friend’s position as Chair of the Select Committee, it would be rude not to give way to him.

[Mr Betts]

I thank my hon. Friend for giving way and I am sorry that there are so many disappointed faces on the Government Benches. Oppositions are always better than Governments at arguing in favour of giving more powers and control to local authorities. That has happened over the years. Looking to the future, does he accept that we need to develop a local government system whereby local authorities have greater ability to raise money themselves and make their own decisions in doing so? We also have to address the issue of equalisation and recognising needs. There has to be an element of central funding, but it would be helpful if local government as a whole had the right to be given control of a specified amount of income tax, rather than have to be reliant on Governments, who can change the system and take away powers and money on a whim.

[Jim McMahon]

My hon. Friend puts on show his experience with a detailed assessment of the types of variable taxes that local government really needs in order to be sustainable in the long term. We are in the process of looking at local government finance in the longer term, and I make this plea: that we look a bit more broadly than the traditional council tax and business rate base; that we are open-minded about having a more varied range of taxes for local authorities to take; and that, in doing so, we ensure that local authorities are held to account and that they can work together to secure the right distribution method so that funding is genuinely based on need.

Housing and Planning Bill

Debate between Jim McMahon and Clive Betts

Tuesday 3rd May 2016 Commons Chamber

[Mr Betts]

We had evidence from various housing associations about how they were going to respond to the proposals. Some made it very clear that they felt they would gain fewer properties to rent under section 106 agreements than under the previous legislative arrangements. They also made it clear that given that there is now no money in the Government’s housing programme for the rest of this Parliament for any houses to rent, in terms of grant assistance, all the resources—the £8 billion—will go either to starter homes or to shared ownership. Many associations believe that they will be building fewer homes to rent on an affordable basis because of the combined effects of policy as a whole. That will vary from association to association.

Tony Stacey, the chief executive of South Yorkshire Housing Association, told us that in much of the area where his association works it would not be possible to build back with the money that will be given from the sale of housing association property, and it was likely that the association would simply go and buy up another property in the private rented sector. That could happen as well, and it would not act on the housing stock. There will be very different policies in different areas. I would argue strongly, in relation to starter homes, that we should reflect that by enabling local authorities to come to different agreements that suit their local needs. As the hon. Gentleman will recognise, the Select Committee said very clearly:

“Starter Homes should not be built at the expense of other forms of tenure…it is vital that homes for affordable rent are built to reflect local needs.”

[Jim McMahon (Oldham West and Royton) (Lab)]

Does my hon. Friend share my concern that research commissioned by the Local Government Association highlights the fact that in 220 local authority areas, people who are in need of affordable housing will not be able to take advantage of the starter homes that are being proposed?

[Mr Betts]

Yes. It is interesting that my hon. Friend mentions the LGA, which argued very strongly, on a cross-party basis, that the policy of the right to buy for housing association tenants should not be funded by the sale of local authority assets. I will make sure that I get the Committee’s words right in quoting them to the hon. Member for Thirsk and Malton (Kevin Hollinrake). We said that

“public policy should usually be funded by central Government, rather than through a levy on local authorities.”

As usual, perhaps the Government ought to listen to the words of the Select Committee. The whole issue of the right to buy for housing association tenants would not be a significant point of contention if the Government were not forcing the sale of local authority homes to pay for it—and we still have not had the figures to show how that would work. With regard to sorting out more flexibility on starter homes, I still do not know what their policy amounts to because of the lack of clarity that we have had.

Finally, I want to raise two really worrying issues where the Select Committee did not come to a view—lifetime tenancies and pay to stay. We welcome the fact that pay to stay will be voluntary for housing associations. However, the situation will be a bit strange in a street where two tenants are earning the same amount of money and paying similar rents, one in a housing association property and one in a council property, and one finds their rent going up and the other does not. Let us get away from the talk about subsidised council housing. There is no central Government subsidy to housing revenue accounts, so there is no subsidy to council tenants earning a little more than their neighbours next door, but what there will be, if this measure goes through, is a tax on those tenants, because the money will go not to the council but to the Treasury, and the Treasury levying a charge on a council tenant is a tax by any other name—of course it is.

Let us put that together with the lifetime tenancy issue. Are we really going to end up with council estates where some homes will have been sold, but in different proportions in different areas, some of which will then have been sold on into the private rented sector, so that we have an increasing mixture of people on the lowest incomes and people there on only a short-term basis? By forcing their rents up, we will push out people on slightly higher incomes who may have a long-term commitment to the area and roots in the area. They may be the people who run the local housing association, the local residents group or the local community forums, and are really active there. Of course, the very same people will be the longer-term tenants who have a real interest in and long-term commitment to their area. What does this policy, and this mixture of policies, do for social cohesion? It undermines the whole idea of a long-term commitment by people who are rooted in their areas and want to stay there because they enjoy living there, they have connections there, their kids go to school there, and that is where their home is.