Marcus Jones
Main Page: Marcus Jones (Conservative - Nuneaton)Local Government Funding: Rural Areas
Marcus Jones Excerpts
The Parliamentary Under-Secretary of State for Communities and Local Government (Mr Marcus Jones)
It is a pleasure to respond to this important debate, and I start by congratulating my hon. Friend the Member for Beverley and Holderness (Graham Stuart) and other Members on securing it. I pay tribute to their valuable contributions and, in particular, to the great passion that my hon. Friend and colleagues have shown for our rural areas. I would like also to take this opportunity to recognise the hard work and dedication of rural authorities across the country over the past five years and their contribution to improving local services in challenging times. It is local knowledge, experience and capability that will help to overcome the challenges faced by rural communities, to improve local services and to grow rural economies. We are committed to supporting rural areas in fulfilling that role.
We recognise that rural communities face particular issues, and that some rural councils with low council tax bases face particular pressures. That is why we are determined to continue tackling the deficit to secure the country’s economic future, while also providing help and support to rural authorities. We want rural areas to contribute to and benefit from economic growth. The rural economy is worth £210 billion. Our rural development programme for England has invested more than £400 million in projects to support the rural economy, and we are investing a further £3.5 billion by 2020. We are also investing £780 million for areas that commercial broadband coverage will not reach. To support areas further, we will grow the local growth fund to £12 billion by 2021.
In December, the Secretary of State announced an historic four-year settlement for local government, on which we are consulting until the end of this week. Our proposal is designed as a sustainable pathway to transform over-centralised Britain into one of the most decentralised countries in the world. By 2020, local government will be entirely funded by its own resources—council tax, business rates, and fees and charges—which was never thought possible until very recently.
Since the beginning of this Parliament, we have been honest about the fact that this change must be fiscally neutral, and that we would phase out Government grants and give councils new responsibilities. We are currently consulting on the settlement, and all councils, including those from rural areas, and Members of this House are welcome to respond. Indeed, we can take many comments made by Members this evening as representations to that consultation. I have also already met a large number of local councils, as well as the Rural Services Network today, as part of that consultation. We had a very constructive discussion and I encouraged them—as I have encouraged all local authorities—to set out in full their detailed observations and suggestions in relation to the consultation.
We want to be candid about our proposal. It does require continued savings from local government in order to meet our deficit target, which should not come as much of a surprise to anyone. The unanimous view across local government is that the biggest cost pressure is on adult social care, which a number of Members have mentioned. Our introduction of the 2% social care precept flexibilities for adult social care and the additional £1.5 billion of extra funding for the better care fund, which will all go to local government, will help to address that, but we do not underestimate the challenges ahead. That is why we argued for the possibility of a four-year budget deal, so that authorities that are affected can look at ways in which they can smooth the path over the four years and use reserves, if they feel that that is appropriate and can be justified to the local authority. However, we also want to make it absolutely clear that, despite invitations to do so, we have made no assumptions in our published figures that councils will use their reserves, whereas the Office for Budget Responsibility assumes that councils will continue to add to their reserves during the spending review period.
Graham Stuart
Many rural residents will ask why it is that, given the need to make savings, the reductions in central Government spending power are disproportionately reducing more in rural areas than in urban areas. By 2019-20, Government-funded spending power in the East Riding of Yorkshire will be £214 per head, while in Kingston upon Hull it will be £468—a 14% reduction in Hull and a 28% reduction in the East Riding of Yorkshire. How is that right or fair?
Mr Jones
My hon. Friend has made that point a number of times. It is a significant contribution to the current consultation. I will come on to that point, but the package that we have put forward for local government will continue, notwithstanding his comments, to see a narrowing of the gap between the core spending power for rural and urban authorities.
Several hon. Members rose—
Simon Hoare
I am enormously grateful to my hon. Friend. The four-year period to reduce and remove the RSG is understood across the local government piece. Will he advise me what I can say to Dorset County Council, and indeed what colleagues from Buckinghamshire can say to their county council, about what happens in two years’ time when the RSG disappears? All their budgetary planning is now shredded.
Mr Jones
That brings me back to why we introduced a four-year settlement. In a moment, I wish to talk about the move to full business rate retention. Hopefully, within those comments, I will be able to reassure Members that, at this point, it is by no means a done deal.
We have given careful consideration to the challenges that rural areas face. That has led us to propose an increase in support for the most sparsely populated rural areas by increasing the rural services delivery grant from £15.5 million this year to £65 million in 2019-20.
As hon. Members know, the new homes bonus was due to come to an end, but our view is that it has been a useful contributor to the increase in planning permissions being granted, with payments since its introduction in 2011 totalling just under £3.4 billion, reflecting the building of more than 700,000 new homes and the bringing back into use over 100,000 empty homes. We have been able to retain the new homes bonus, subject to reforms on which we are consulting and on which views are being encouraged.
Overall, our proposals are fair. Core spending power for councils will be virtually unchanged over the Parliament—£44.5 billion in 2015-16, and £44.3 billion in 2019-20. This is a substantially slower pace of spending reductions than councils had to deliver between 2009-10 and 2015-16.
The rural-urban funding gap has been falling year on year. Between 2012-13 and 2015-16 it went down by over £200 million, decreasing from 11% to 6% for unitary authorities and from 19% to 11% for districts. Our proposals mean that it will continue falling throughout this spending period, and core spending power will increase by 0.2% for rural areas, compared with a 0.7% reduction for urban areas, by the end of the Parliament.
James Heappey
Will my hon. Friend confirm that if the gap between urban and rural is closing, albeit slowly, unfortunately that is happening on the back of an increased council tax burden in rural areas?
Mr Jones
I hear what my hon. Friend says. Council tax is now 11% lower in real terms than it was in 2010. The Government’s assumptions do not assume a 2% increase in council tax, but a consumer prices index inflation increase in council tax. The calculations also show that once we get to the end of this Parliament, if councils were minded to take up the flexibility that has been offered, council tax would still be lower in real terms than it was in 2010.
Sir Edward Garnier
My hon. Friend is doing the best he can and is doing exceptionally well, I am sure. He said that the increase would not be as high as anticipated, but what is the expected increase in council tax that the Government are planning for? That is what we want to know.
Mr Jones
It is down to local authorities whether they feel it right to increase council tax. As I said, the increase that has been built into the figures is 1.3%, which is currently the rate of inflation, and that does not factor in, as I said, an increase up to the 2% referendum principles.
Let me deal with the issue that my hon. Friend the Member for Beverley and Holderness raised in relation to full business rate retention. I can assure the House that a number of consultations are still to be undertaken on full business rate retention. No details have been finalised on how that system will work. Obviously we need to ensure that no areas are left behind when we move to the new system, which has been welcomed, as hon. Members have said, and that includes safeguarding a number of rural authorities that are not in as strong a position as many urban authorities when it comes to raising business rates.
We also need to ensure that we incentivise local areas to increase their business rate base and increase growth and the jobs that come with it. We need to look at that in the context of balancing that reward with the risk associated with challenges on revaluations and when business rates are no longer collected. Such instances were mentioned earlier in the debate. I just want to reassure my hon. Friend the Member for Beverley and Holderness that the Government are considering that very carefully for the future.
My right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) made an extremely powerful case for county areas that include both rural and urban areas. The hon. Member for Workington (Sue Hayman) put the case for Cumbria and mentioned the challenges faced by rural authorities, particularly those affected by the recent flooding. The Government obviously have a great deal of sympathy for the people facing those challenges in Cumbria. We have put forward a significant support package of £60 million to help people in places, such as Cumbria, that have been significantly affected by the recent flooding.
My hon. Friend the Member for North Dorset (Simon Hoare) raised a number of issues. He said that he would like to see more opportunities for district councils to implement a £5 increase in their council tax, rather than the 2% referendum principle. He mentioned the challenge around local planning fees, which I am sure is something we will take on board. He also mentioned the importance of adult social care, as did my hon. Friends the Members for Thirsk and Malton (Kevin Hollinrake) and for St Ives (Derek Thomas) and a number of other colleagues. As I said earlier, the Government are putting forward an additional £1.5 billion through the better care fund. I would like to reassure hon. Members that, unlike the current iteration of that fund, the £1.5 billion will all be going to local government.
I completely agree with my hon. Friend the Member for South East Cornwall (Mrs Murray) that car parking should not be used, as she put it, as a cash cow. The figures we have prepared certainly do not take into account any increase in fees and charges that local authorities might wish to make.
My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) made a number of points, one of which was the need, in his view, for local government reorganisation. The Government are willing to listen to proposals, but I am sure that he will know that they must be local proposals that are brought to the Department.
My hon. Friend the Member for North Devon (Peter Heaton-Jones) made a number of points. He mentioned coastal deprivation, which is an extremely important point. He will be glad to know that the coastal communities fund has been extended for another three years, with £90 million. He invited me to visit Ilfracombe, and I look forward to doing so the next time I am in that neck of the woods. During the summer I spent several periods in Cornwall and Devon on visits. I was extremely impressed by the approach of many areas, particularly how local government was trying to deal with the challenges that are currently faced.
Sue Hayman
We have deprived coastal communities in west Cumbria as well. With regard to the retention of full business rates, one of the areas that we get the most funding from is the nuclear industry, from which we retain 50% of business rates, but the proposal for new build is that the Government would take 100% of business rates. Will the Minister confirm that that will be looked at as part of the funding formula?
Mr Jones
Obviously we are looking at the whole of the funding that comes from business rates. I hope that the hon. Lady will be supportive of the nuclear industry, because there seems to be some confusion about that. I hope that she will also support Trident, which is also an important part of industry in this country.
My hon. Friend the Member for Isle of Wight (Mr Turner) set out the challenges that the island faces. I thank him for bringing representatives of his council to see me last week.
The hon. Member for Croydon North (Mr Reed) set out a number of challenges that the Government face in this regard, but he did not say anything about the main reason we are in the position of having to make extremely difficult decisions—the deficit that his party left behind when last in government.
We have recognised the challenges faced in rural areas and agree with many of the points made today. We are committed to supporting our rural areas, even at this time when there are some differences in opinion about how that is achieved. We want to give rural areas as much power as possible to grow their local economies and support their communities. This is a time of big opportunity and expectation of reform in local government. I assure hon. Members that we are listening carefully as we prepare the final settlement and consider how the transition towards 100% business rates retention happens. As I say, we are in a period of consultation. We will add the representations made in this debate to that consultation. I encourage right hon. and hon. Members and their councils to make written representations by Friday. We are listening carefully to colleagues. I have listened carefully to what has been said in the House today, and we continue to listen carefully to our colleagues in local government.