District Council Finances

Mark Pawsey Excerpts

Wednesday 1st May 2019 Westminster Hall

[Mark Pawsey (Rugby) (Con)]

I beg to move,

That this House has considered district council finances.

It is a great pleasure to serve under your chairmanship, Mr Gapes. I am very pleased to have finally secured a debate on the finances of district councils, which is an important subject. The fact that we got the debate now is testimony to the popularity of debates in Westminster Hall. I shall speak about a report that was published by the all-party parliamentary group for district councils in July 2018. Since our return after last year’s summer recess, I have consistently been applying for the debate, and we have finally got it, and with local elections tomorrow, it is extremely timely—persistence has finally paid off.

I am a Member of Parliament representing a district; I represent the borough of Rugby. I am a former district councillor and member of that authority, and very proud to have represented my community on the council and to have the opportunity to represent it in Parliament. As a former member of a district council, I strongly believe that they have a vital role to play in the next few years in shaping and delivering Government strategy, supporting local growth, building the homes we need and providing the preventive services that are necessary for sustainable health services.

To set the context, there are 192 district councils. In two-tier areas, they deliver 86 of 137 essential local government services to 22 million people, which is 40% of the population. District councils cover 68% of the country by area. One of their most important functions is as the housing and planning authority; they approve 90% of planning applications in their areas and enabled over 91,000 new homes to be delivered last year.

I am very proud to say that my local authority, Rugby Borough Council, saw 584 dwellings completed in 2017-18. It is a great example of a district that looks favourably on house building and development, and it has a very progressive attitude. I know the Minister saw that on his recent visit to Halton, which is an excellent example in my constituency of house building at scale, with a development that will consist of 6,200 homes by the time it is completed.

In two-tier areas, the county council area is divided into a number of districts, which each have an independent district council. I firmly believe that district councils are closer to their residents than are the vast majority of other forms of local government, which is one of the reasons I strongly believe that they should be protected. Rugby town hall is in the middle of our community. It is accessible by all residents and immediately identifiable; it gives a sense of identity to our community. I know there are pressures that are leading some areas to consider alternative arrangements—in particular, there is a move towards unitarisation—but in my area that would be neither practical nor in the best interests of our residents. Districts operate on a size and scale that makes sense to local communities, and they have a unique understanding of the residents they serve.

[Alberto Costa (South Leicestershire) (Con)]

May I take this opportunity to congratulate my hon. Friend on securing this important debate? Blaby District Council and Harborough District Council, led respectively by Councillor Terry Richardson and Councillor Neil Bannister, are both excellently run. Does my hon. Friend agree that any proposal for unitarisation of the Leicestershire area is not welcomed by the district councils?

[Mark Pawsey]

I share the views of my hon. Friend in believing that districts are the right-sized and best-located authorities to deliver a substantial number of services to local residents. I fear that some of that connectivity and identity would be lost in a larger organisation.

I will now talk about some of the things that district councils have been able to do. One key issue that came out of our report is that district councils have a proven track record of devising innovative solutions to transform public services by taking a lead in improving services and providing outcomes for people through better collaboration. That is a really important point, which we will come back to again and again. It is driven by a financial imperative in some instances, but in many ways it is driven by the desire to do things better.

District councils have a proven track record in building better lives and bigger economies in the areas they serve. Through their roles in planning and housing, they act as the building blocks for local economic growth, and in many ways districts work collaboratively with each other and alongside newly established local enterprise partnerships to deliver growth and support local businesses and industry. I believe that district councils also protect and enhance the quality of life by safeguarding our environment, which is an issue we will be considering later today in the Chamber. Promoting public health, leisure and a sound environment is an important role, creating attractive places to live and where people will want to raise their families and build an economy. Districts are also tasked with the challenge of tackling homelessness—again, their proximity to the people and knowledge of individuals is important—and the duty to promote wellbeing.

For district councils to deliver for their residents and the businesses in their area, it is important to ensure that they have sustainable and suitable levels of funding, which is the matter I want to address. It is why the all-party parliamentary group for district councils, which I chair, held a formal Select Committee-type inquiry on the finances of district councils. We published our report, “Delivering the District Difference,” in July 2018. I want to put on the record my gratitude to the 60 local authorities that provided written evidence to the APPG, and I thank the seven district councils, including Rugby Borough Council, that came before us and provided oral evidence to the APPG in Parliament. I am also grateful to many parliamentary colleagues who sat on that committee, particularly the hon. Member for Stroud (Dr Drew), who took part in the evidence sessions and is here today.

Our report was a major piece of work, and we collaborated with the District Councils’ Network to ensure that we were working closely with the sector. I thank the DCN for its valuable contribution to the report. In our evidence sessions, it came across loud and clear that district councils under financial pressures have identified innovative and efficient ways of doing things differently to provide better value for money to local taxpayers. A recent Local Government Association report found that district councils have saved £224 million through sharing services with other districts and bodies, which is far more than any other type of council.

I will give some examples of shared working arrangements that my local authority, Rugby Borough Council, has with others. Rugby has a shared service on building control with Warwick District Council and works on procurement with our neighbours, Nuneaton and Bedworth Borough Council. A particularly useful case study in Rugby involves its working closely with Daventry District Council to provide local crematorium and cemetery services. On its own, neither authority was of a sufficient size to be able to deliver these services efficiently, and my constituents wishing to use crematorium services were obliged to make lengthy journeys to either Coventry or the other side of Warwick. There had been an aspiration for such a service in Rugby for some time, but it was recognised that, in isolation, Rugby was not of sufficient size to deliver it. By working with Daventry and providing a facility on the border between the two authorities, we have ensured that the residents of both local authorities have great provision.

National Audit Office figures show that district councils have experienced the most significant real-terms cut in spending power between 2016-17 and 2019-20, which has required them to be enterprising. One of Rugby’s overarching corporate priorities is to become financially self-sufficient by 2020. It is seeking to reduce its reliance on the sometimes arbitrary and variable central Government funding sources and take control of its sources of income through local taxation arising from economic growth and investment income. When I was a councillor, I was always aware of concerns that the pots of funding might or might not be available. They were sometimes arbitrary or time-limited, which meant that it was difficult to plan for the long term. Rugby aims to be financially self-sufficient so that it is no longer reliant on those variable sources. That will ensure better provision for my constituents in the long term.

All councils have had to work hard to achieve more with less. Between 2010 and 2020, councils in England will have lost almost 60p of every pound of central Government funding. For district councils, that equates to almost £1 billion. I know the Minister recognises the role that districts have played in identifying savings, and is aware of the burden that they have shouldered in recent years.

[Alberto Costa]

I thank my hon. Friend for his generosity in giving way again. The district councils in my constituency have highlighted the ever-increasing cost of waste and recycling services. Proposals to scrap a charge on green waste collection and introduce weekly food waste collections, although laudable, are likely to put significant financial burdens on district councils. Does my hon. Friend agree that, should district councils implement those changes, proper and full support is needed from central Government?

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[Mark Pawsey]

There is a role for central Government, but those are local, devolved matters for district councils. One of the good things about district councils is that, because they are close to their residents, they know and understand what is best for them. My hon. Friend draws attention to the important role that district councils play in environmental matters, which are of real concern to residents.

In recent years, districts have been given more freedoms and powers to stimulate their local economies. In our report, we urge the Government to commit to retain current incentives to help district councils deliver the homes that the country needs. We are keen to see the retention of the new homes bonus. My local authority in Rugby has a very progressive attitude to new house building and is doing well from the new homes bonus, which enables local residents to support the principle that it has adopted.

During our inquiry, the all-party group heard evidence about the savings and efficiencies that can be made in social care by increasing district councils’ capacity to deliver preventive services. Mannie Ketley, the head of service and chief financial officer at Rugby borough council, told us:

“What the districts have shown, working in conjunction with the county council, is that a very much joined up approach has been of huge benefit, so I am confident that as groups of authorities come together, districts are well placed to support in the delivery of social care…Something for districts to consider, or certainly for government to consider, is our role from a prevention perspective and the ability to allow district councils to levy a prevention precept much like upper tier authorities are able to levy that social care precept. There is a huge amount of recognition of the role district councils play at the prevention end of the spectrum”.

They do that through, for example, the provision of recreation facilities that enable people to get out into the open and enjoy the countryside.

The evidence and insights that the all-party group received led us to make seven key recommendations. We identified measures, flexibilities and incentives to stimulate local growth. I want to put them on the record and share them with parliamentary colleagues. The first and most important is that no district council should find itself in the position of negative revenue support grant. That would mean that councils hand over to the Government a proportion of the tax that they raise locally, which would be a real disincentive to grow the local economy. I will come to the way in which our proposals have been addressed.

We argued that the fair funding review should reverse the decline in district council spending power. We suggested that districts should be allowed the freedom to introduce more incentives. We said that measures to increase district spending power should include greater flexibility to raise revenue and introduce incentives to support local growth.

I have already referred to the new homes bonus. We argued that the baseline should be removed, and that there should be a long-term commitment to the new homes bonus. In fact, we went further and said that district councils should be given more financial incentives to deliver more homes. The time available to local authorities to spend right-to-buy receipts should be extended, and districts should be allowed to retain 100% of those receipts.

We spoke about our concern about the lifting of the borrowing cap—I will come to how the issues have already been dealt with by enabling district councils to spend the entirety of their funding. We drew attention, as Mannie Ketley did, to the role that districts play in prevention as housing and planning authorities. They provide leisure and recreational facilities, install home adaptions, tackle homelessness, offer debt advice and deliver social prescription. We also spoke about the need to establish a health prevention fund to support projects that deliver preventive services, which would in turn reduce the financial burden on adult social care.

I am delighted that the Government allocated extra funding in the 2018 Budget and the 2019-20 local government finance settlement, and that two of our recommendations have already been acted on. Just a week after we published our report, the Government announced that they would cancel the negative rate support grant for 2019-20, recognising the disincentive effect. The removal of negative RSG has meant an average saving of more than £350,000 for every district council that would otherwise have faced negative RSG, and more than £50 million overall.

On our recommendation that there should be no further changes to the new homes bonus and that the baseline should be removed, the pot of £18 million is welcome. For my local authority, Rugby Borough Council, no change to the existing threshold means that it would not receive any new homes bonus funding for the first 150 homes delivered each year. The Government have also announced the lifting of the housing borrowing cap, which will be a very significant and helpful move for districts, and more money has been made available through the rural services delivery grant.

The all-party group is delighted that the Government have responded and listened to the voice of districts. We are grateful for that response of recognising the need for change and listening to the voice of districts. At the conclusion of the debate, I hope that the Minister will update the House about the other recommendations that our all-party group made, in particular our call for greater freedom to deliver preventive health services. It is important to invest in such services for the broader welfare of our citizens. I will also be grateful if he outlines what consideration he is giving to the introduction of further freedoms and incentives for districts to grow their local economies.

As the Government look at the technical detail behind the future funding formula and business rates retention, I hope that the Minister will provide some reassurance that districts will continue to receive their fair share of funding. For many local authorities, there is a lack of clarity, and further rates reductions for some will mean a less reliable basis on which to plan budgets appropriately. All organisations, whether in the private or the public sector, benefit from a longer-term perspective, but the funding available from April 2020 remains unclear, as is how it will be distributed and the means of delivery. It is vital for the 2019 spending review to provide the right level of funding for local government, enabling councils to perform their role. Rugby Borough Council, for example, tells me that it faces several risks from the forthcoming funding reform and has concerns about whether it can continue to deliver the high level of services it provides.

The recommendations in our report have many positive aspects across all districts. I am delighted that the Government have already adopted many of them, and I look forward to hearing from the Minister what steps the Government will take in respect of the other recommendations we made.

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

It is a pleasure to serve under your chairmanship, Mr Gapes. I congratulate the hon. Member for Rugby (Mark Pawsey) on securing this debate, although its importance is not reflected in the number of speakers. Nevertheless, that does not mean that the work done by district councillors across England is not critical and life changing to millions of people. I place on the record my thanks to our councillors of every colour, and I wish every candidate success, in different degrees, in tomorrow’s local elections.

The vibrancy of local democracy is what communities are all about. Most of us have come into politics through local government, because we are passionate about the places we live in and the power of positive politics to make a difference. District councils reflect that in a special and unique way because of how grounded they are in the local population. They are important also because they are the primary deliverer of neighbourhood services. I think about what makes an area somewhere decent to live; it is those neighbourhood services that make life worth living—a decent park, good quality countryside, clean and safe environments, and access to cultural facilities such as libraries. They all make up the fabric of our local communities.

There are tensions between districts and councils, but generally they work well together and, between them, provide good quality services for our communities. Like every council in England, they are under huge financial pressure. It is a bit simplistic to look at a spreadsheet, which we do whenever there is a local government finance debate, and to dismiss the cash cuts to district councils as being quite small. Their budgets, however, are much smaller. The percentage loss, particularly across critical neighbourhood services, has been profound in many district council areas. Rugby has experienced a real-terms cut of 47% to cultural services for recreational sport, open spaces and tourism. People feel the impact of austerity even at a district level.

That brings me to the fair funding review. We can all argue about how we have ended up here—we do that on a regular basis. The challenge, which is similar to that for adult social care and children’s services, is that most of the issues should not be party political. They are not political—they are about the delivery of public services in local communities. Regardless of the places we represent and live, we all want good quality public services to be available to everyone.

Political parties need to unite on some of the issues—local government does that anyway—and find long-term, sustainable solutions to how we fund local public services. We have a fair funding review today, but who knows when a general election will be called? A change of national Government matters almost more to local councils than to any other part of government, central or local, because it has a direct implication for how they are financed.

Every Government have always moved money around to favour the areas where they have strong representation. When there was a Labour Government, my locality had enough money to fund public services. It was never quite enough because we always wanted to go further and do more, particularly on housing and the local economy. Then, we had a change of Government and there was a shift. There is a good chance that when the cycle comes back around, the reverse will happen. That is not the way to fund sustainable public services. It does not give credit to our public servants who work for local authorities and it is not fair on the local councillors who have to deal with that cycle of spending turmoil. It is not right for the taxpaying public, either.

On cross-party consensus, the Local Government Association—I declare an interest as a vice-president—carried out an independent review of local government funding a number of years ago. It looked at the then current state and at what type of future structure could provide sustainability and value for taxpayer money. We need to look at some of those ideas.

[Mark Pawsey]

I am listening carefully to the hon. Gentleman, who seems to be making a pretty strong case for local authorities becoming self-sufficient. Is that what he is arguing?

[Jim McMahon]

I understand the calls for that, but I stop short of it, or anywhere near it, because the ability to fund local government public services is so heavily dependent on property taxation, which causes huge geographical inequalities across the country. We want a funding formula and structure where funding follows need. If we give local authorities financial independence there will be significant winners but also significant losers. My strong view is that council tax places a disproportionate burden on local taxpayers in terms of overall taxation. It has been expected to fund too many local public services while the central Government grant is being reduced. Business rates are near breaking point. Those taxes serve a very important purpose, but they also have significant limitations.

Whether it is a district or unitary council, the connection between the tax people pay and the neighbourhood universal services they receive is very healthy for democracy and transparency in governance. I am not sure whether the same is true of social care and children’s services, which in general benefit a smaller number of the local population. Those services are targeted, not universal, and have no relationship to local property values in 1991 or the business rate base that has been built up over hundreds of years. At some point there will have to be a separation of the two, for a purer connection between the council tax that people pay locally and the neighbourhood universal services they receive in return. There should be a properly assessed fair funding formula to ensure that funding goes where older people need care, children need social services, and homes need to be built to resolve homelessness. If we were to do that, it would be a start.

The LGA’s independent review also recommended that there ought to be an independent body to assess the total requirement across England. It would not, of course, set the Treasury’s Budget, but it would make recommendations to the Treasury about the total sum local government needs for the requirements placed on it by central Government. If the recommended sum was £1, the Government might decide to provide 90p of funding and distribute that according to an independently assessed fair funding formula.

Another suggestion, which has huge merit, is that we should establish local public accounts committees. Our councillors see on a daily basis where money is spent in their areas by a range of Departments, in a way that almost no other elected representative does. That provides important insight into how money could be used to better effect. Establishing a local public accounts committee would effectively allow a local authority to hold the ring on all the public sector spending in its area—to ensure that there is no duplication, that any gaps are identified and filled, and that people can work more collaboratively for better public services. Our councillors have proved, and all the evidence shows, that they are best placed to deliver public sector efficiency. They are rooted in the community, they know how to deliver public services, and their insight would help the whole of Government.

To be honest, however, even after all that, there is still not enough money in the system. We know that there will be a funding gap of more than £3 billion by the coming financial year, and by 2024-25 that gap will have increased to £8 billion. The truth is that people are living longer and need care. We know that if we do not give them care in their homes, we will put pressure on the acute sector and the NHS. We also know that children need safeguarding. We can have good processes and screening in place, but ultimately we have to provide protection for young people. The threats are increasingly complex, particularly with the growth of online social media and so on, and councils need the capacity to deal with that. Many are struggling under the weight of those two pressures.

Will the Government meet us halfway and agree to take some of the politics out of local government spending, for the benefit of all of local government? Will they be radical in challenging the Treasury to cough up for once and provide the money that is needed to fund local public services? Will they show leadership and stop pitting council against council? This is not about urban areas and rural areas, or counties, shires and unitaries; this is about local people and local public services, and every man, woman and child in England deserves decent public services.

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[Mark Pawsey]

The debate has focused mostly on finance and funding, but it has been a valuable opportunity to consider the important role that district councils play in communities, and the important functions that they deliver. I am grateful to colleagues who spoke about the roles of their district councils and some of that innovative work, and to the hon. Member for Oldham West and Royton (Jim McMahon) for his reference to the neighbourhood services that district councils provide. It seems that there is a benefit to the delay between asking for a debate and securing it, because it gave the Government time to respond to many of the issues raised, and I am pleased they have taken those points on board.

I was interested in the Minister’s emphasis on stronger economies and the role of district councils in building those economies and developing high streets. I am also delighted that he took on board the bit about better lives. This is not always about finance and pounds and pence; it is about lifestyles and the benefits that councils can bring to the lives of individual residents. I am grateful to the Minister for his remarks, and for the opportunity, once again, to highlight the important role played by district councils.

Question put and agreed to.

Resolved,

That this House has considered district council finances.