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Local Government Finance

Volume 560: debated on Monday 18 March 2013

6. What his policy is on the funding gap between rural and urban local authorities; and if he will re-open the 2014-15 settlement. (148142)

I recognise the case that has been made for funding for rural authorities. In February we made some adjustments to the financial settlement for 2013-14 and confirmed changes to sparsity top-ups.

I thank my hon. Friend for that answer, but does he agree that rural authorities are due to receive, on average, a 5.58% reduction in formula grant, which is more than two percentage points greater than urban authorities, which are due to receive, on average, a 3.54% reduction? Is not that actually extremely unfair and not a sensible way to encourage growth in the rural economy?

This year we changed the sparsity levels within the banding so that the reduction for rural areas is not as great as that for urban areas, thereby slightly narrowing the gap. I appreciate that Members who represent rural areas have made a strong case this year for going even further, which is why we brought in £9 million-odd in extra finance to help local authorities servicing those rural communities with deprivation.

I am grateful to the Minister for that response, but surely if he will applaud Cornwall council, for example, for freezing its council tax this year, he must accept that it has been persistently underfunded despite being the poorest region of the UK. When will Cornwall and places like it get a fair share of the available money?

The hon. Gentleman is absolutely right: Cornwall has frozen its council tax this year. That is good news for residents across Cornwall, and I am pleased that the council decided to do it. Throughout the finance-setting debate we discussed the difference between rural and urban areas, and that is why we put in the extra money to help to narrow the gap. Over the course of the year, before next year’s settlement, we will continue to discuss the situation with Members representing rural areas, although I must be clear that only in exceptional circumstances would we reopen the settlement.

One of the reasons for the gap is that urban areas have to deal with the influx of European workers who come here under freedom of movement, and cities such as Bradford have to bear the brunt of that. Has the Department looked at this issue in relation to the concentration of new workers coming to areas such as Bradford?

When we do the setting every year we look at all the developments in different communities. People are also moving into rural areas. In Norfolk we would class ourselves as rural, but we have a population coming from overseas as well. It is something that we consider across the board.

I am proud to be from Wirral, not least because we are the perfect mix of rural and urban together, but people in Wirral are suffering from the severity of the Government’s cuts, which are linked to deprivation levels. When will the Government say what they will do to tackle deprivation, especially in areas such as Merseyside where it has hit councils so hard?

It is sometimes easy to forget, and I remind the hon. Lady, that an area such as Liverpool has a much higher base start in the first place. A constituency such as mine, which has some very high deprivation, has a spending power of £2,200 per dwelling, whereas Liverpool’s is up at about £3,000. There is a big difference in the first place, and we have to bear that in mind when we are trying to make comparisons between different authorities.