Local Government Finance

Lord Kennedy of Southwark Excerpts

Thursday 13th July 2017 Lords Chamber

Moved by

[Lord Kennedy of Southwark]

That this House takes note of local government finance and arrangements beyond 2020.

[Lord Kennedy of Southwark (Lab)]

My Lords, in moving this Motion, I bring to the attention of the House my usual declarations of interest—namely, that I am an elected councillor in the London Borough of Lewisham and a vice-president of the Local Government Association.

I am delighted that a number of Members with expertise in local government and finance are speaking in this debate, as this is an important issue that we need to keep raising and shining a light on.

I have served on two local authorities. Presently, I am a member of Lewisham Borough Council, and many years ago I was a member of Southwark Council, the borough where I grew up.

Throughout my working life, as a full-time official for the Labour Party, I have had dealings with councillors in a variety of local government settings, including larger parish, district, county and unitary authorities, and seen a variety of different methods of governance, both as a controlling majority group, part of a coalition and in the role of an opposition group. Councillors of all parties generally do a difficult job very well, and are supported by dedicated professional staff delivering important services—everything from preschool and nursery provision through to social care towards the end of life, and the more general services such as keeping the streets clean and the street lights working properly.

Local government is ever present in people’s lives. It is the part of the state that they see most frequently, and the council has a leading role in understanding the issues that local people have and in delivering solutions for them. Councils need stability and as much certainty as possible to do their job. I accept that that is not always easy, but where they can, the Government need to help local authorities and not make things more difficult for them. I hope that in responding to the debate the noble Lord, Lord Young of Cookham, can give more certainty. Where he cannot, will he at least agree to take back the concerns raised in the debate and initiate discussions within government, the department and with the Local Government Association to as quickly as possible bring more certainty and stability on the issues raised.

I have a number of general points to make and some specific points in respect of London. Local government is not clear where it is heading beyond 2020. In the last Parliament, discussions and work took place to develop a new system by which local government as a whole would retain 100% of its business rates by the financial year 2019-20. With the calling of the general election, the Local Government Finance Bill was lost, understandably. The Bill set out a framework for local government in England to keep all of the £26 billion it raises locally in business rates, and it is fair to say that there was some surprise that there was no mention of this in the Queen’s Speech that was recently unveiled. Certainly my party had some issues with the scheme, such as how we were going to introduce fairness without making things worse for those councils that do not have the income base to replace the money they received through central government grants. But everyone was surprised that this key piece of legislation does not appear to have made it even to the starting line this time, in a Session of Parliament that is supposed to last two years. Perhaps the noble Lord, Lord Young of Cookham, could shed some light on what has happened to the Bill? Is it is on the back burner, has it been scrapped never to be seen again, or will it resurface at some point in the future? In addition to finding out what has happened, it would be useful if we were given the reasons why that is the case.

Recently, there has been lots of debate and discussion in many forums about austerity, including the Cabinet, which we know from what we see and read in the media. There have been lots of briefings from various Ministers both on and off the record. What cannot be in doubt is that local government has taken a huge hit in the spending decisions made by the Government in recent years, despite delivering some of the services that people rely on the most.

The Local Government Association pointed out recently that funding lost from central government since 2015 and projected further losses will mean that, by 2020, local government will have lost 75p of every £1 it had to spend of core central government grant. That will equate to a £5.8 billion funding gap by the end of the decade, with an estimated additional £1.3 billion required to stabilise adult social care. That gives a total of £7.1 billion as a funding gap—a staggering amount that will result in significant reductions in services that people, sometimes the most vulnerable in our communities, have to rely on.

In addition, the department’s own figures show that funding to local government will have fallen 63% in real terms up to the financial year 2019-20, but overall public spending will have increased by 4% in real terms over the same period. So we have further savings along with increased demand for services, which is particularly stark in London. It would be useful if the noble Lord, Lord Young of Cookham, could update us on the fair funding review which the Government have committed to. If we do move to another system of funding local government, we want to ensure that it is fair and addresses all the needs, as it is often areas with huge social needs that are not going to have the business rate base to replace the funding they lose.

London has unique pressures. It is a growing city with huge challenges that need to be addressed. Adult social care is a problem widely acknowledged but with no sustainable solution identified. In London, the elderly population is expected to rise by 70% between now and 2039. I am in that group of statistics, as are, I suspect, many of your Lordships who are not yet retired and live in London. A long-term solution to adult social care needs to be found, but as the Prime Minister found out during the election, solutions that are not carefully worked out are not going to be accepted and will prove impossible to deliver.

Children’s social care is another pressure point, with the growing requirements of the new Ofsted inspection framework. In London, the overspending is twice that of adult social care, and with London’s young population set to continue to rise, this demand is only going to increase.

We all acknowledge that there is a housing crisis. The Housing White Paper was a missed opportunity and we have seen very little from the Government when measured against all the hype and expectation that was generated beforehand. Government policies leaving people without recourse to public funds add significantly to overspending pressure on local authorities, as does homelessness and the requirements of the Homelessness Reduction Act 2017. The Government do not appear ready to provide the level of funding necessary to make this legislation work. The 1% rent reduction on social housing is also making the situation worse.

As I outlined earlier, we need to see stability in local government funding. The Government need to be clear on their plans for 100% business rate retention. If the 2020 plan is no longer on the agenda, what is?

Many in this Chamber and elsewhere have raised the fact that we have not had a revaluation of council tax. Governments of all persuasions have time and again decided to sidestep that issue. The Government need to take a proper look at council tax: is it fit for purpose, is it the right vehicle for local government and does it deliver what is needed? Is the hypothecated precept for social care the right mechanism or just a sticking plaster that is not going to do the job?

The borrowing cap on the housing revenue account should be removed to help address the housing crisis. We need to build more council homes on proper social rents.

On a whole variety of services, local government levies fees and charges for delivering services. The fees are often at rates set by the Government, with no local discretion. If we even got to the point at which there was full cost recovery, it would be progress. I recall our debates in this House on planning fees. Although there was some proposed uplift, local authorities are still not going to be recovering anything like the costs they expend, and that situation is the same across other services.

It is a perfect storm. Local government has no certainty how it is going to be funded post 2019-20. Whatever the funding mechanism, there are huge issues regarding fair funding; there are greater pressures on and more demands for services, especially for those that are vulnerable, in early years and in social care; people are trapped with no recourse to public funds and turning to the local authority as they have nowhere else to turn; there is a housing crisis and a desperate need for more homes to be built at social rents; the housing revenue account is under pressure from enforced rent reductions; and there is no sign that the Government are going to let councils build more homes. I could go on and on. It is shocking: this is a terrible state of affairs that the Government must urgently address.

However, urgency seems to be in short supply at the moment from the Government. No one could suggest that in either House there has been an energetic start from the Government in this Parliament. I know that they have problems, but those are entirely of the Prime Minister’s own making. Local government and the residents it serves need certainty, action and direction. There are big issues to be solved and local government often speaks with one voice on these matters with little to divide the parties. Local government is asking to be allowed to do the job that it is capable of doing through a funding mechanism that is fair. It wants action from the Government to allow it to get on with the job. It is time for the Government to respond positively to the call being made by local government for certainty and stability, and to be given the tools to do the job.

--- Later in debate ---

[Lord Kennedy of Southwark]

My Lords, I thank all noble Lords who have spoken in the debate. Listening to it, I was struck by the amount of agreement on all sides.

The noble Lord, Lord Shipley, made an important point about collaborative work and the need for clarity in the patchwork that has been created. We have discussed many times the issue of council tax. The noble Lord, Lord Marlesford, who is not in his place this afternoon, has talked about that issue many times and presented a Private Member’s Bill in the previous Parliament looking at council tax bands.

My noble friend Lord Desai talked about the problems we have caused ourselves by not having a revaluation. As we have heard, council tax was introduced as a fix to get the Government out of the poll tax disaster, and many noble Lords referred to it. I did not realise that the Minister had opposed the introduction of the poll tax. I congratulate him on doing so—well done.

My noble friend Lady Donaghy made a powerful point about the crisis in social care. I know the area to which my noble friend referred, as I went to school in Peckham and Camberwell and lived in Walworth. I was a Southwark councillor for many years. The noble Lord, Lord Young of Cookham, mentioned aldermen. I was appointed an honorary alderman by Southwark council many years ago after I left the authority. When I was a councillor there, we had a category of housing called “hard to let”, which included the Pullens Estate in my ward. No such category now exists because there are no more homes that are hard to let—every home is snapped up the moment it becomes available.

The noble Lord, Lord Greaves, commented on austerity and how to move forward. His points in respect of parks were also well made.

The noble Lord, Lord Young of Cookham, has an open invitation to visit Lewisham any time he wants. I would be delighted to show him what a great place it is, particularly if he comes to Crofton Park, which I represent. In issuing that invitation, I hope that I will cause him none of the problems that he had when he went to Pendle, because there have been a few issues there in the past.

My noble friend Lord Smith of Leigh has vast experience of local government as the leader of Wigan Council and as a member of the Greater Manchester Combined Authority. The spending cuts have had a real effect on people’s lives, and my noble friend highlighted many other issues, such as council tax. He made an important point about the effect of the cuts in different authorities, and that, for me, highlights how important the fair funding review will be.

The noble Baroness, Lady Pinnock, raised a number of interesting points, including on VAT, road tax and other taxes. I did not mention it in my opening contribution, but the London Finance Commission has reported under both the previous mayor, Boris Johnson, and the present mayor, Sadiq Khan, and has looked at those very issues. I think I am right in saying that both mayors have been supportive of the commission’s reports, but perhaps further work needs to be done. This may be an issue that needs to be looked at in the future.

I thank everyone who has spoken in this debate. Again, I make the point that on most of the issues raised today local government speaks with one voice, and that is one of the more positive things to have happened in local government in recent years. Things were very different when I was a Southwark councillor in the 1980s. However, things have moved on, which pleases us all. Any disagreements today tend to be much more between central and local government; as I said, local government often speaks with one voice.

The response from the noble Lord, Lord Young of Cookham, particularly in respect of local government finance, was interesting. Discussions need to take place urgently on how local government is to be funded in future years, particularly beyond 2019-20. It does not appear that the previous proposals, if implemented, will be achieved in the same timescale—these things always seem to slip.

In conclusion, I thank the noble Lord, Lord Young of Cookham, for his detailed response to the debate, which he delivered with his usual courtesy. I appreciate it very much, and I thank all those who have spoken.

Motion agreed.