I beg to move,
That this House has considered funding for local authorities.
I thank the Chairman of the Backbench Business Committee and the Committee for allowing us good time to debate this serious subject.
In the summer of 2012, the Secretary of State for Communities and Local Government recognised the penalty for rural authorities—that is, that the formula for allocating funds to local authorities disadvantaged those in rural areas—and improved the sparsity weighting for the formula for the local government financial settlement for 2013-14. That was the good news for rural authorities, and the Government must be commended for recognising that historical inequality and for seeking to improve the funding formula for local authorities to take into account the higher costs associated with delivering public services in rural areas. I fully support the Government in their stated aim.
However, the Government seemed to have a little wobble. The damping model that the Department chose to minimise the swing in funding for councils wiped out all the gains from the improved formula for rural authorities, and as a result their total funding actually fell faster than that of urban local authorities. I am not seeking to steal money from urban authorities; I seek a fair deal for rural authorities as well.
The Department allocated a further £8.5 million to the most sparsely populated authorities after the rural fair share campaign. MPs pressed the Department and made our case. However, that is still only a one-off grant for 2013-14, and it distributes the £8.5 million to 95 local authorities in amounts ranging from £649,000 to £856,000. Is the Department considering ensuring that we have a little bit more money than that next year? In fact, I would like another £30 million at least. I probably cannot horse-trade too much, but it must be recognised that the rural authorities are not getting their fare share. Although welcome, the one-off grant makes no material change to funding disparities within the overall £22 billion settlement. That is a very big sum of money.
I hope the hon. Gentleman accepts that there are significant regional variations in the impact of the cuts. It is not just urban or rural; in some regions, both urban and rural authorities are facing significant disproportionate cuts in relation to national averages. The north-east of England is facing cuts across the board of about 23% in the next two or three financial years.
The hon. Gentleman is right, because what the Government seem to have done—dare I be so blunt as to say it—is to ensure that those that least need it get the most money, by which I mean the south-east of England. Coming from the west country, I would of course say that. Many of my colleagues from the south-east probably do not necessarily agree with me.
It is not a question of drawing blood. I hope that at some stage someone will say how much support there is for the elderly on the south coast—say, in the Worthing district—compared with support for the elderly in the north-east or the south-west.
My hon. Friend makes a good point, because I believe that will need to be recognised not only in local government funding but in health service funding. In my constituency the town of Axminster has a population profile that matches the one forecast for the country in 2035, meaning that there is a much more elderly population. In Seaton and Sidmouth and along that coastline, there is an increasingly elderly population.
I congratulate the hon. Gentleman on securing the debate. Does he agree that the local government funding formula in general needs to be looked at, because there are different problems in different regions, and they require different answers? In Coventry, the local authority has lost £45 million over the last three years and is expected to find another £19 million next year. That is affecting jobs as well as services, so Coventry is down 15%—1.5% above the national average in relation to cuts and resources.
I started my political life in both district and county council—this is going back to the ’80s—and the formula was just as complicated then. Under successive Governments we have made it even more complicated. I think, dare I say it, that it is all done because if the formula is made complicated enough, no one will understand it and those in government can do what they like. The Government spend a lot of time talking about the spending power of councils. It is not only about that spending power, but about how we get to that spending power and who pays for it. I shall discuss that issue later.
Urban councils are still receiving 50% more per head than local authorities in rural areas, despite the fact that residents in rural authorities, such as Devon county council, pay 15% more council tax, and many public expenses are more expensive to deliver in sparsely populated rural areas.
West Somerset, which my hon. Friend knows well, is the most sparsely populated part of England, with the smallest council. As he knows from his days in Somerset county council, we have never been able to catch up with the deficit, simply because the rurality of the area means that there is no way, with our ageing population—it is the same in Axminster—to do that. Perhaps we should look at the future size of these councils to see whether they could provide a joint service to make more efficient use of funding made available through the Government.
I remember West Somerset well from my local government days. The problem is that it has a population of about 28,000 or 30,000, and if it is necessary to have a raft of chief officers to run a council, it becomes extremely expensive. We must come up with a system whereby some of the very small rural authorities can share their chief officers or combine them, because in this day and age it is difficult to deliver with very small authorities.
The Minister is aware of the work that was done by the Conservatives in High Peak borough council when I served on it. It shares a chief executive and a senior management team, and I am delighted that the Government have now recognised that and given the local authority some money as well.
My hon. Friend makes a good point. A council in my constituency, East Devon, shares a chief executive with South Somerset. Even though it is a sort of coalition, because one is Liberal Democrat-controlled and the other is Conservative-controlled, it works at officer level. Even though adjacent councils may be of different political persuasions, they can share resources. If it is possible to share administrative resources and cut expenses, it is possible to deliver a far better up-front service. That is what local government finance is for—to give people services, not to be gobbled up in administration. I have believed that all my political life.
More importantly, the local government settlement for 2014-15 is being frozen until 2020. As a result, the current disparity in funding between urban and rural local authorities will be entrenched, locking in past inequalities. The Government set up the review to settle that disparity, but we now have a damping and a freezing—back to square one for another five years. What is the Minister going to do about it, and how are we going to settle this so that we can transfer funds and have a fair deal?
I pay tribute to my hon. Friend for securing this important debate. He and I both represent very rural constituencies. Does he agree that it is important for the Government to explain to us what work they are doing fully to assess and understand the sheer cost of providing services in rural areas in comparison with inner-city areas, and the impact of that on our constituents?
I know that my hon. Friend represents his rural constituency in Shropshire very well, and he realises that sparsity of population, distances, small schools and so on make services much more expensive to deliver. The irony of his question is that the Government have already done that work. They have already investigated the situation and come up with a policy to transfer those funds. That is what is so frustrating; they will not carry on with the process. That is why I am particularly keen to get them to look at that again and continue the great work that they have already done. That is all I ask. I am not asking for a new wheel; I am just asking for the present wheel to be rolled a bit further.
The hon. Gentleman is making some sensible and considered points, but does he agree that the unfairness in the system—I know the grant system is incredibly complicated—is exacerbated by the existing plan to top-slice and hold back grant, such as the new homes bonus? That simply amplifies the problems for areas that are already disadvantaged, such as many of the local authorities in my region, including Durham county council and Gateshead metropolitan borough council.
I do not necessarily want to get into a debate on how the new finance will be handled. Retaining the business rates and the new homes bonus are all part of it. A system where it is shared more equally across all authorities in the future may be one answer, but I do not want to argue with all the Government’s policies. I just want them to carry on with the very sensible policies that they had. [Interruption] Did my hon. Friend the Member for Beckenham (Bob Stewart) want to intervene?
When invited to intervene, I am delighted to do so. In the area that I represent, Beckenham in Bromley, we sometimes feel that although we are part of London, we are quite hard done by. For example, meeting the statutory requirements to 2018 will inevitably result in a £36 million deficit, so it is not easy. The metropolitan areas also have problems and there are differences between metropolitan areas. Bromley is currently very hard done by.
Order. Before the hon. Gentleman answers that invited intervention, I remind him that one does not invite interventions, particularly when he is supposed to be speaking for only 15 minutes, but of course he could give way to his hon. Friends if they indicate that they want him to. Otherwise, I hope he will desist.
I apologise, Madam Deputy Speaker. I thought somebody behind me had asked to intervene, hence I turned around. It was not purposely done, I assure you. In the future I will make sure that I do not invite interventions.
We are not asking for a change in the Government deficit reduction strategy. We support the Government in taking tough decisions to tackle the budget deficit inherited from the previous Administration. A quarter of all public expenditure is accounted for by the councils so this must be addressed. In response to my hon. Friend the Member for Beckenham, whom I unfortunately invited to intervene, there is some discrepancy in the figures for central London and those for outer London boroughs. The problem with local government formulae is how we invent a system that is fair to all.
Does my hon. Friend agree that there is an issue in relation to the definition of “rural”? My understanding is that the Department for Environment, Food and Rural Affairs uses the rural-50 or the rural-80, whereas in this case the “shire” word has been used, which will inevitably skew the results?
My hon. Friend, who asked to intervene, is right. There is a different definition in DEFRA from the one used in local government, which does not seem to recognise councils that have a large rural population and larger rural parts of their areas. Why is it that the Department for Communities and Local Government does not recognise the DEFRA definition and may come up with another one? Is it to complicate the grant system still further? It would be cynical, would it not, to suggest such a thing.
We are here to press the Secretary of State to make good on the long-standing promise to correct the historic imbalance and give rural local authorities their fair share of central Government funding, in line with the summer consultation. We call on the Government to reduce the urban funding advantage over rural areas incrementally, year on year, to no more than 40% by 2020. Closing the gap between urban and rural can be achieved within the existing resources, within the period to 2020, without placing any individual authority in a worse position than others, and it is one of the recommendations to be made to the Government by the Environment, Food and Rural Affairs Committee, of which I am a member, in its report on our inquiry into rural communities.
By reducing urban funding by an extra 0.1% per year of the £24 billion local government funding settlement, the Government can reallocate £30 million to rural authorities and reduce the funding gap from 50% to 40% by 2020. I know that this is a matter of concern across the House. I thank my hon. Friend the Member for North Devon (Sir Nick Harvey) and my hon. Friends representing Worcestershire for helping me to secure the debate today. I also thank my hon. Friend the Member for Beverley and Holderness (Mr Stuart), who chairs the rural fair share campaign—
Indeed. I thank my hon. Friend the Member for Beverley and Holderness for pursuing the issue with great vigour, for considering the issue with Ministers with such tenacity, and for helping to secure this debate, as well as for the support and information provided by the local authorities in Devon and across the country.
A quarter of England’s population live in rural communities. Providing services presents many challenges to local government. This is particularly true in rural Devon, where there are serious barriers to services, with nearly 56% of residents living in rural areas across the county and with the house price to earnings ratio well below the national average. Lower than average wages and higher house prices is a trend replicated in other rural local authorities.
Reflecting on the point that the hon. Gentleman has just made, I know that many people regarded the council tax and its implementation as a blessed relief in the aftermath of the poll tax in the early 1990s, but unfortunately property valuations have not been reviewed to any great extent since then. An eight-band taxation system might have seemed fair at the time, compared with what there was before, but it has meant an awful lot of people in poor value properties paying a much greater proportion of their income in local taxation.
The hon. Gentleman makes a good point. However, the Government that he supported had 13 years to change that and chose not to. The problem with opening up the issue of council tax banding is that it is probably a very big can of worms. I understand why successive Governments have not gone there, but that does not necessarily mean that one day we will not have to do it.
One of the biggest obstacles to providing services to a dispersed rural population is the high cost of transport, which has a knock-on effect on nearly all other areas of local government responsibility, such as adult and social care services, refuse and recycling, and ground maintenance. In 2009, 42% of households in the most rural areas had regular bus services close by, compared with 96% of urban households. These rural bus links are often the only way for many residents, particularly pensioners, disabled people and the unemployed, to access public services. I think I am right in saying that some 20-odd per cent. of the population of Devon has to go to work on buses, and if there are no buses, it is very difficult for them to do so.
My hon. Friend is making an excellent speech. Does he agree that that also has a massive affect on education and the cost of getting children to school in rural areas, which is not part of the education funding formula but is part of local authority funding?
My hon. Friend makes a good point about the distances involved in getting children to school. Also, in rural areas we have many smaller schools, which are very good schools but are more expensive to run.
Despite the fact that rural areas have been underfunded, I would highlight the very good services that education authorities, schools and those across the piece have managed to deliver in very difficult circumstances. However, that does not mean that we should sit here and allow the Government not to give us a fair share. I want to put it on the record that I believe that we have very good services, despite the meagre amounts being spent on them.
I am sure that the hon. Gentleman will agree that the areas he and I represent have an additional problem in social care, because £0.8 billion has been shifted away from local government to try to fund social care, leaving a gaping hole in the funding.
Order. Before the hon. Gentleman answers that intervention, I remind him that the Backbench Business Committee’s recommendation was that the opening speech should last between 10 and 15 minutes. Even with the interventions, whether invited or given, he has now been speaking for 22 minutes. A large number of Members wish to speak in the debate, so if he would consider drawing his comments to a conclusion in the near future, I would be grateful.
Be quiet. [Interruption.] I mean, the hon. Gentleman must be quiet.
To put it in perspective, Devon county council currently spends over £10 million a year on statutory bus pass schemes, which is twice as much as it can afford to invest in the actual public bus services. I am delighted that the Government are sticking to their promise to maintain concessionary bus passes for pensioners, but Devon county council will need to fund them. I am sure that the House will agree that bus passes will do nobody any good if there are no buses on which they can be used.
Public transport is also a challenge for local authorities in rural areas with large road networks to maintain. Devon has the largest road network in England, with nearly 8,000 miles. I believe that it has as many roads as Belgium. In 2010 the council had to repair around 200,000 potholes due to severe weather, and since July 2012 Devon has suffered significant flooding, which has done untold damage to the roads.
I will come now to the final part of my speech. The summer consultation showed rural areas gaining more than £30 million. Those gains will be lost because of the chosen damping mechanism, which will actually increase the funding gap between urban and rural areas, the formula grant for rural authorities having fallen between 1.7% and 2.3% more than that for urban authorities. We are not asking Ministers to reinvent the wheel; we are asking them just to knock the corners off and make it round again. We believe that the Government got it right the first time in the summer of 2012 and that the damping model used has prevented that policy from working. I have met the Minister for Local Government and discussed the matter with him. He has been very fair to us, but I want him now to deliver on fairer funding for rural authorities.
I will preface my comments by referring to the speech made by the hon. Member for Tiverton and Honiton (Neil Parish). For reasons I will outline, I do not believe that the real debate should be about rural versus urban areas. I believe that it should be about the fact that local government is being asked to bear the austerity cuts being applied by the coalition Government. That is the real issue.
I wish to put on the record my congratulations to Councillor Steven Houghton, leader of Barnsley council, on recently being raised to Knight Bachelor for services to local government, a well-deserved honour. Steve Houghton has got to be one of the best leaders we have in local government. He has done a great deal to develop local government in this country, including designing the future jobs fund, which has now been abandoned.
Like many other right hon. and hon. Members, I was a local councillor before entering Parliament. I was a member of my local council for nine years and was very proud to be a councillor and a cabinet member for education. I now represent the constituency of Penistone and Stocksbridge, which straddles two metropolitan local authorities, Barnsley council and Sheffield city council. It is an incredibly diverse constituency. A large part of it is rural. Indeed, it contains much of the north-eastern aspect of the peak district national park—it does not get any more rural than a national park—within its boundaries. But other parts of the constituency would best be described as semi-rural, suburban and urban.
In other words, the constituency spreads from the fringes of urban Barnsley and urban Sheffield right out into the valleys of the peak district. In the rural western part of the constituency, one finds all the usual issues: the needs of local farmers and other typical problems, such as lack of access to high-speed internet or a decent bus service, and there are all the other issues relating to affordable housing, employment and access to work.
However, other parts of my constituency, such as the old pit villages of High Green and Dodworth face challenges common to former coalfield areas, as the disappearance of what was essentially a key economic activity rooted in villages has left a huge vacuum in employment and, in High Green, severe social problems. Then there are the urban areas in Sheffield, which carry with them all the seemingly intractable problems we have seen emerge since the deindustrialisation of the 1980s.
My constituency is similarly dispersed. Does my hon. Friend agree that the cost of services in rural areas is far higher, and was not she, like me, appalled to hear Tory Councillor Nick Worth of Lincolnshire county council defending the closure of more than half the libraries in Lincolnshire?
I completely agree. The closure of libraries really worries me. We face similar levels of closure in Sheffield. We are not applauding or welcoming those closures; we are having to deal with the terrible impact that we know they will have in our area. But we know that the reasons for those closures lie with the lack of funding from central Government.
I have sketched my constituency not because I want to wax lyrical about the area I represent, but because I want to establish a key point that is all too often overlooked when we consider what I call provincial England, meaning England outside London. For too long the debate has been unhelpful, sitting on a platform that polarises the arguments. For too long the argument has been about rural areas versus urban areas, as though the two are literally miles apart. Nothing could be further from the truth, as my constituency exemplifies. As I have already said, I represent deeply rural areas located firmly within a metropolitan borough. I represent rural areas that in the past have supported engineering and coal, railways and ceramics as well as the vital agriculture industry.
My plea to the Chamber today is this: let us start having a more rational and pragmatic debate about the role of local government, let us stop dividing our country up into areas of interest, and let us start representing properly the interests of all the people of England. Let us not have a debate in which we say, “My rural area isn’t getting enough from the Government, so let’s cut the funding for the metropolitan boroughs.” Let us properly recognise that most parts of England, including the metropolitan boroughs, are more complicated than appears to be the case when we just look at a title such as “Sheffield city council.”
Whether or not we are talking about local government in rural or urban areas, the fact remains that central Government are weakening local government, because one of their proposals, the new homes bonus, takes discretion away from local authorities and puts it in the hands of local enterprise partnerships, and who are they accountable to?
I accept my hon. Friend’s point. Affordable homes are a key issue in all areas, both rural and urban. It is important that local authorities have the key role in determining, politically, the best way of delivering those new homes—at the city region level in the case of my constituency—across a borough such as Barnsley, which has a lot of green-belt land. In fact, most people will be surprised to hear that the majority of land in Barnsley is green belt.
The hon. Lady seems to be implying that it is inherently wrong to voice concerns about differences in funding between rural and metropolitan areas, but I represent a totally rural constituency that receives less than half the funding for education services than certain parts of inner-city areas, so the hon. Lady cannot blame us for trying to raise those concerns.
I do not blame anybody for raising concerns about their own constituencies, particularly with regard to education, but that is not the key point in relation to funding for local government services. Metropolitan areas have significant rural aspects. In fact, Rotherham, Doncaster and Barnsley between them are 70% rural. The way in which the hon. Gentleman expresses his argument is not helpful in delivering more resources for his area. I repeat that the key issue is the central Government cuts to local government funding. The difference between provincial England and the capital is another issue that has been completely overlooked.
Before coming to this place I had the privilege and pleasure of being a local authority councillor in Gateshead for 27 years. Like my hon. Friend’s borough, Gateshead is very diverse: it has a concentrated urban core and a big rural hinterland. Councillors who represented the urban core and those who represented the leafy shire had these types of discussions, but we would never have swapped our social problems, because the differences were stark.
My hon. Friend hits on a key point. That is why I mentioned the old pit villages in my constituency which even now carry the deep scars that were left behind, not just on the landscape but on the lives of the people who were, in effect, abandoned following the wave of closures in the late 1980s and early ’90s. People underestimate how difficult it is for an authority such as Barnsley to rebuild an economy that was built almost entirely in villages. It is not easy to rebuild that type of economic infrastructure once it has disappeared.
Local government provides many of the public goods that our constituents consume, whether they live in rural, suburban or urban areas. These include emptying bins, educating our children and picking up the pieces of shattered lives when things go wrong. Local government is the backbone of our civil society. There is no doubt, however, that it is approaching a crisis that is not of its own making, but that has been made in the offices of No. 10 and the Secretary of State for Communities and Local Government.
We have all seen the infamous graph of doom, which shows that councils will eventually run out of resources to run anything except the most basic of services. For my two councils that catastrophe will occur in 2018, when all discretionary spending will disappear and major cuts will have to be made to adult social care and other core functions. Councils up and down the country are being asked to do more and more, but with less and less resource.
In addition, it is clear that this Government decided early on to contract out many of their austerity measures for delivery to local councils across the country. The average cut to departmental budgets has been about 7% in real terms according to the special interest group of municipal authorities, but local authorities have seen their share of funding fall by 27% over the same period, with only benefits and welfare being cut more, which, of course, has in itself had a direct impact on demand for local authorities.
To compound matters for the core cities, while the average loss of Government support in England will be £240 per household in the years 2013-14 and 2015-16, the core cities will see a reduction of £352 per household. On the issue of rural and urban areas, metropolitan areas are bearing a large part of the local government reductions—much more than has been acknowledged so far in this debate—which is not at all helpful in terms of delivering for the rural areas in those metropolitan boroughs. That is on top of the already unequal cuts that core city authorities have experienced since 2010, which have seen them lose a third of their grants from central Government.
If that was not bad enough, these cuts have not been the end of it for many local authorities. The hidden cuts, including those major cuts to grants, are not so obvious to many of our constituents. For example, a £400 million cut occurred when council tax support was transferred to local authorities, and the cut to the early intervention grant removed £430 million at a stroke from local authorities. These cuts are now on a scale never seen before and they are having a chilling effect on local services.
Contrary to the belief of the Secretary of State, local government has not been a place of excess. In fact, it has been recognised for many years as the most efficient branch of government, and that makes it even more likely that cuts to its funding will have to come out of the services it provides.
No, because I have already taken up a fair amount of time due to interventions.
By the end of this financial year Sheffield will have made savings amounting to £182 million—about a third of its discretionary budget. As many will know, that is because the only part of the budget that councils can actually manipulate is relatively small. In the case of Sheffield, it is about 16% of the overall budget, meaning any savings have to be focused on that relatively small proportion of the available resource. That has had a huge impact on leisure, the arts and environmental and street scene functions. Indeed, the impact is being felt across the country, hence the campaigns springing up against library closures everywhere. In Sheffield it has led to the closing of Don Valley stadium, the removing of funding for leisure centres—the only two leisure centres in my constituency have both closed—as well as a significant reduction in library services and a move to fortnightly bin collections. The story is the same in Barnsley, with the £35 million removed from its budget leading to library and leisure centre closures and cut backs in grants to voluntary organisations and other vital services.
Our local authorities are becoming shadows of what they once were. Local people in my two boroughs are increasingly being asked to travel further to access services such as libraries and leisure centres at a time when funding for local bus services is also being cut by central Government. If this situation continues, how far will people have to travel, paying increasingly expensive bus fares, to get to the services they need?
As has been said, on 1 April the Government introduced the new business rate retention scheme, which fundamentally changed the way in which local authorities receive their resources. Although these changes to the new settlement funding assessment make it difficult to make a comparison between previous and future years, the end result for Sheffield and Barnsley seems to be the same—another round of cuts, with Barnsley having £40 million less to spend up to 2015 and Sheffield facing a further shortfall of £80 million up to 2015, rising to £106 million by 2018. To put those figures in perspective, £80 million equates to Sheffield’s current total spend on libraries, environmental heath, trading standards, refuse collection, crematoriums, street lighting, youth services and services to people with mental health issues.
The new settlement funding assessment, along with the retention of business rates, means that from now on the only way my two local authorities and many others can realistically grow their revenues is through growing the business rate income. Indeed, that is the exact intention of the Government’s thinking. That is great for Westminster, because companies are falling over themselves to locate there, but not so great for Barnsley, given the difficulties it faces. That does not mean that Barnsley does not want to compete or attract new business, or that progress has not been made, but it is hard. The borough, along with its neighbour, Sheffield, still has a long way to go. That is hardly surprising, given the deindustrialisation that it suffered in the ’80s. Even if businesses can be attracted, the work that is required to fill the economic gap left by the contraction of traditional industries is immense. To fill Sheffield’s £38 million funding gap for next year, the equivalent of two new Meadowhall retail centres would have to be built. That is a tall order to say the least.
I started my comments by saying that local government is important. It is also true that more and more people will require the services that it provides. Those who rely most on local authorities are the elderly, the young and the vulnerable. The possibility that councils will run out of money for all but the most basic of services is fast becoming a reality. As I said earlier, Sheffield will run out of money for all functions other than children’s and adults’ services, and will have to start cutting even those key functions, by 2018. Every day, I hear stories of vulnerable people being isolated more and more as councils pull out of the services that they used to provide. I fear the sort of society that we are becoming as councils stop providing the support that they have provided until now.
If the Government continue down the already well-trodden path of exporting their austerity measures to local authorities, many parts of the country will see local services cease. It is the most vulnerable, the elderly and future generations who will bear the brunt. It does not matter whether those people live in rural areas in Devon, Sheffield or Barnsley, or in metropolitan or urban areas—they will suffer.
Clearly, we are in tough times. It is therefore absolutely right that we endeavour to get more for less. The Government have been very prudent in doing two things: managing budgets and costs, and pushing down much of the decision making to a local level. I am particularly fond of the localism agenda.
However, I represent a very rural constituency in Devon and I share the concern of my hon. Friend the Member for Tiverton and Honiton (Neil Parish), who secured this debate, that there is a divide in how funding has been allocated. It is to the credit of the Government that they have recognised that divide. As my hon. Friend said, the challenge is in getting the Government to “get on with it”. It is clearly inappropriate that urban authorities have 50% more to spend than more rural authorities. There is a big job to do.
The cuts to local authority funding have been criticised by Opposition Members. I do not know how many of them were listening to BBC Radio 4 two days ago, but it cited an ICM poll showing that there was a good deal of satisfaction with local government services. The areas that were of concern were social care and potholes, which have a particular impact in rural areas and areas with elderly populations.
My hon. Friend rightly mentions the important ICM survey. Six out of 10 people think that services are better than they were in 2008. Does that not exemplify the point that, by utilising resources more effectively, services can be provided without increasing council tax massively?
My hon. Friend is quite right.
The challenge is to ensure that, in rural areas, we get the job done. As has been mentioned, there are problems with the way in which the Government define rural—whether we should use the shire definition, the rural-80 or the rural-50—and with how damping was applied. There are questions to be asked about whether that was done in an appropriate way. As has also been mentioned, there has been some top-slicing of the new homes bonus, so some money that would have gone to local government is going to local enterprise partnerships. Those are all issues that the Government could sensibly look at.
The Government have said that rural areas must do the right thing. They have said that what they proposed for rural areas was fair because there was still fat to be cut. In Devon, council tax has been frozen for the past three years, 3,000 staff have been lost, spending has been cut by £100 million and 98% of council tax is being collected. Fraud accounts for only 0.003% of the budget, which is a very small amount in the grand scheme of things. Our reserves are also relatively modest. There are two separate pots, but the one for ongoing operational costs covers only two days of operating costs and the other covers planned future development.
I understand what the Government are trying to do—we must clearly manage costs—but Devon has done its best to manage its books. It now has to find £130 million of savings. It has looked hard and is now looking for the last £46 million. It is looking at some of the areas that were mentioned by the hon. Member for Penistone and Stocksbridge (Angela Smith): youth services, day care centres, libraries, residential care, children’s centres and community transport. I absolutely agree with her that those things matter.
The challenge is how we address this matter. I say to the Government: let us walk the walk and not just talk the talk. Let us be honest that there was something not quite right in the funding formula and look at it again. Let us also be honest about the top-slicing of the new homes bonus. My concern is that LEPs have not been running for very long. Although I am sure that some of them are more than capable of sensibly using a top-sliced chunk for infrastructure projects, there are others that are very early in their development. Many councils have been planning infrastructure projects for a long time, but now find that the funding is being moved to another body. That should give us pause for thought.
The two areas of dissatisfaction in the ICM survey were potholes and care for older people. Devon has £700 million-worth of work on the roads that has not been done, never mind the problems that are caused by the winter. If we are to reform local government spending, we must look at the Bellwin formula. The way in which it was calculated meant that it gave Devon only half of what it needed to get the roads back in order. As my hon. Friend the Member for Tiverton and Honiton mentioned, that was partly because we have 8,000 miles of road to deal with.
Buses are another key issue. As my hon. Friend the Member for Tiverton and Honiton said, bus passes costs us £10 million and we then have £5 million left to spend on public buses. He said that many people rely on public buses to get to work. Indeed, whether it is to get to work or for any other purpose, more people use the buses than the trains, so it is short-sighted to fail to provide funding for that.
Of course, we cannot forget education and schools. Devon is almost, although not quite, at the bottom of the league table. It is 145th out of the 151 local education authorities. It receives £395 per pupil below the average. Given the additional costs because of transportation and the size of the schools, that is untenable. The Government have recognised that, but we need them to do something.
The Government have promised to put some money from the NHS into local government. However, there is a lack of clarity about how that will happen and how much money it will be. Without that information, it is difficult for local government to sort out its finances.
Finally, although it is absolutely right that communities should work with local authorities to do what they can together, leaving it to the local community to pick up all the work that cannot be afforded is not realistic. A number of community transport groups have come to me because demand well outstrips supply. They are struggling to cope with the number of people who are trying to get to hospital appointments, many of whom have wheelchairs. There are simply not enough drivers or vehicles. We applaud those in the voluntary sector for the fantastic job that they do, but, as the squeeze comes, we need to recognise that they cannot completely fill the gap and that they need help and support in trying to do so.
First, I congratulate my hon. Friend the Member for Corby (Andy Sawford) on his new responsibilities as a shadow local government Minister, which are well deserved. I am sure he will do just as well at holding the Government to account as his predecessor, my hon. Friend the Member for Warrington North (Helen Jones), whom I congratulate on her achievements in the job and wish success in her new job.
The Local Government Association, whose figures I believe are accurate—it is a cross-party, Conservative-led group—states that in the course of this Parliament, Government funding to local government will be cut by 43% in real terms, which is more than twice the level of cuts experienced across government as a whole. Why is that? I hope the Minister will respond to that question.
Do Ministers somehow feel that the services that people receive from libraries, sports centres, environmental health, parks and street cleaning are less important than anything else? I suggest that they are not. Do they believe that local government is somehow less efficient and therefore has more ability to make cuts without damaging services? I do not think there is any evidence of that—indeed, the evidence has shown the opposite over the years. Local government has generally been more efficient and more effective in bringing about efficiency savings. Or, in the phrase that my hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) used, is it simply about the Government contracting out the responsibility for making the cuts to somebody else, namely local councils? I suspect that that is probably the reality. Why have local services been picked out for larger cuts than anything else?
My second point is about the distribution of the cuts. We can argue about that, and everyone will have their own view, but it seems slightly unreasonable that Sheffield, despite all the demand for local services from local people and all its problems and challenges, should have received cuts of about £200 per head of population, whereas down in Windsor the cuts are £40 per head of population—five times less. I know the Minister will say that it is because cities such as Sheffield get more in grant, so they have more grant to cut. However, why have they had more grant than elsewhere in the past? We can argue about fine amounts, but essentially it is because they have more problems, more challenges and less resources than areas such as Windsor. That is true of many northern cities, which are the ones that we expect to be the powerhouse for growth and for rebalancing our economy. They are receiving the largest percentage cuts.
We can add in the cuts to the fire service, and there are also the new proposals that will redistribute health money away from cities such as Sheffield, because there will be less recognition of need in the formulas. Cuts in different services in the same areas will multiply the effects.
It is not just Labour authorities such as Sheffield that are saying that the cuts cannot be sustainable but the Local Government Association and Sir Merrick Cockell, who is a very reasonable man. He speaks well for local government as a whole on behalf of a Conservative-led, cross-party grouping that says the cuts are unsustainable. Those comments have been repeated by Conservative authority leaders such as the one in Kent, who says that there is no more capacity to keep on making cuts while keeping local government services sustainable.
The LGA states that, on top of the 43% cuts in this Parliament, there will be a gap of another £15 billion if the cuts continue to 2020, which local government simply will not be able to find. We know from its briefing—I have also had discussions with it about this—that based on the Government’s current forecast, there are 56 councils whose current levels of spend are 15% higher than their income is likely to be by 2015-16. There is a gap of 15p in the pound between their income forecasts and their current levels of spend, so some of those councils will get into serious financial difficulties. They are not councils of any one party persuasion, and they are not solely in metropolitan or rural areas—they are councils across the piece.
We know that the Department for Communities and Local Government monitors that matter, and we hope it is talking to the LGA about it, because it is a serious problem. The graph of doom has been mentioned, and whereas three or four years ago it was a bad idea that might happen at some stage, it is now a serious prospect.
My hon. Friend the Member for Penistone and Stocksbridge mentioned the situation in Barnsley, and I will obviously talk about Sheffield. There will have been £182 million of cuts between the beginning of this Parliament and 2013-14—the council has had to make those reductions. On top of that, we know that in 2014-15 and 2015-16, a further gap of £80 million will have to be bridged. If we take the projections forward to 2018-19—the Chancellor has indicated clearly his intention that there will be no rowing back from further cuts—there will be another £26 million on top. That money cannot be found without cutting into statutory services, because there is no leeway at all on discretionary services.
The figures that Sheffield council has produced for its current spending show that 38% of the budget goes on care for adults and children. What is often forgotten, however, is the contractual commitments that councils cannot get out of. The whole waste collection and disposal service in Sheffield is contracted to Veolia. Modifications can be made at the margins—there is already an alternate weekly bin collection—but long-term commitments in the incinerator and waste disposal contract cannot be altered. Any change made in such contracts has a financial penalty attached to it.
There is also the new private finance initiative scheme in Sheffield. It is absolutely great—the roads in Sheffield are being repaired, and we are delighted with what is being done. I congratulate the Government on supporting the scheme, which the previous Government drew up, and the council on implementing it. However, that PFI commitment is for the next 25 years and cannot be changed. There are also repayments on borrowing for schools and so on, which cannot be ducked out of. Such contractual commitments and debt repayments make up 46% of the budget, so that leaves 16%.
I have given the figures for the further reductions that are in the pipeline through to 2018-19. By then, the 16% discretionary funding that remains after statutory services, contractual commitments and debt repayments have been taken into account will have gone. There will be nothing left. It is not about which libraries will be closed, because no libraries will remain open. That is a serious situation in Sheffield, which is mirrored in other parts of the country. It is not about one authority somehow failing, it is a potential failure of local government as a whole, not through its own fault but simply because it will not have the necessary resources from central Government and will not be able to raise the money itself. It is a serious situation.
My hon. Friend is making an excellent speech and highlighting the drastic situation facing many councils, particularly in the north and north-east. I am afraid that when I talk to colleagues on the Government Benches, they often seem completely oblivious to the plight of councils such as my own in Gateshead, or those in Northumberland, Durham, Newcastle or Middlesbrough. Local authorities in the whole north-east region are facing average cuts of about £296 a dwelling in the next two years.
My hon. Friend is absolutely right, but I would add that it is not just Labour councils in the north, with all their problems, that will face that situation. A number of smaller councils in the south and south-west will face almost a meltdown situation in the next few years if the same policy is continued.
In his capacity as Chair of the Communities and Local Government Committee, has my hon. Friend given any thought to the effect on the local economy of the reduction in spend by local authorities? In areas such as Hull that are quite disadvantaged in the first place, cuts to local authority spend and procurement will mean that the ability to get growth into the local economy is cut severely.
There is quite a lot of evidence that there is a real difficulty for local economies. In the past, the larger grants were generally directed at authorities with real difficulties, often in areas where industry had been run down. Those areas often had a higher reliance than others on public sector expenditure, and my hon. Friend is right that the reductions in that expenditure are having a disproportionate impact on those communities. As I said, we are in a serious position. I do not think Ministers recognise where we could be heading—perhaps they hope they might be in another job by the time it happens. We can all wish for better things for ourselves, I suppose.
Let me move the debate forward in a slightly different way. We are where we are, but where will local government go in the future? A bit ironically I suppose, the one good point that might come out of this is that local government is now less reliant on Government grants for funding. Government grants have been cut by nearly half, so a bigger proportion of money comes from taxes that local authorities raise. If we are to look forward to vibrant local government, a less centralised state, and localities being less dependent on central Government for funding, and if we are to be localist and look at the balance of power and the things the Political and Constitutional Reform Committee is doing, we must not simply go back to where we were and recreate the grant systems. We must also consider how we can make local government more financially independent in the future.
There will always be an element of redistribution—we have great inequalities in our country so redistribution will always be necessary—and there will always be a case for some element of Government grant. One problem is that, at present, that element all comes from business rates. Because of that, some sensible ideas the Government have had about localising business rates have become convoluted and complicated because those rates both reward development and try to redistribute from those areas with greater resources to those with the greatest need. In principle, however, that is to be welcomed, although in future we will still need an element of Government grant for redistribution.
Why not take up the LGA’s proposals, give the money to local authorities and allow them to distribute it? That would stop councils simply complaining to the Government that they do not have enough money while others have too much. That happens in Denmark, which has a grown-up system. They sit down and negotiate between local and central Government about the amount of money to be passed over, and local government then makes the redistribution between different local authorities. That has worked for a long time. I would have thought most Ministers welcomed with open arms the idea that they would not be responsible for every allocation to every council in the country. Let us see how radical Ministers can be. The LGA was brave in putting forward that proposal, so let us at least look for radical solutions.
The one tax that local government controls is council tax, which is now virtually frozen because of actions by this Government and the previous one. I want to be critical of them both. We had the nonsense of capping under the previous Government—I spoke against that a number of times in the Chamber—and the nonsense of the referendum under this Government. That is not about democracy but about trying to control local government spending. The idea that central Government should have to call a referendum if they want to change income tax or VAT is clearly nonsense and no Government would ever allow it. Local councils ought to be elected and then free to raise the money. If the electorate do not like it, they will vote for somebody else, and that is what democracy at local level should be about. I am against the referendum proposals and against capping.
The Labour party is making great play about the cost of living. In previous years we saw massive increases in council tax, year on year. I remember in Shropshire under a Labour administration that council tax went up by 16% in one year, which had a devastating impact on people with fixed incomes. Surely the hon. Gentleman understands the importance of freezing council tax in these difficult times.
Of course I understand that and any council would want to try to minimise increases in council tax. However, let us also make clear that cost of living increases can come from a local library closure because people have to buy books instead of borrowing them for free, or from the closure of a leisure centre when a family has to book into a private club that involves a lot of extra cost. Cost of living increases can come in other ways, including through cuts in public services.
I also argue strongly that it is nonsense to have local government’s main tax based on a valuation carried out in 1991, and it is ridiculous that 20 years on we have not had a revaluation. The previous Government, this Government, and the previous Conservative Government all bottled out—it is all too difficult. In the end, we have a completely unrealistic situation. No one understands the system any more, which is an attack on democracy and accountability.
My hon. Friend the Member for Corby (Andy Sawford) in his new role will probably not want to comment on this point, but if we are to reform council tax and make it fairer, the relationship between the value of properties and the amount people pay should be reformed. Those in very expensive, large houses should pay more, but why bother with a mansion tax? All we have to do is increase the higher council tax bands, and ensure that the money that comes in goes to local government and does not get siphoned off by the Treasury for other purposes. That is why I am against the mansion tax—I put that on the record to ensure that I have been critical of what both Governments have done.
We have an eight-band system, but it is ridiculous to have a national mean of band D when in a borough such as Gateshead around 65% of all properties are in band A. People in that area in modest properties and on low incomes end up paying much more of their personal income as a proportion of local taxation. That is ridiculous and unfair.
There is a case for review on whether band A should be also split, and there is a good argument for that to make the whole system fairer.
We must also look for other sources of funding for local government. I welcome the report by Mr Travers that the Mayor of London has initiated, which is a good contribution to a debate on how local government should be financed. I am not saying I agree with all the recommendations—the report is about London in isolation, although I am interested that the core cities are starting to engage in the argument, which raises questions about the rest of the country—but it is good that the Mayor has stimulated that debate. He has invited me and other Members to meet him to discuss that issue, and the Communities and Local Government Committee may initiate an inquiry into the matter. At least, however, the issue of how we can get more independent sources of funding for local councils has been raised.
Why not look at income tax again? I remember the Liberal Democrats when they were a radical party putting forward new ideas, not just agreeing with the Conservative party about things. They used to promote local income tax. I disagreed with them then because they wanted to replace council tax. I suggest—there was a report on local finance by the Select Committee in the previous Parliament—that we have local income tax as well, and make the local authorities responsible for a bigger percentage of the money they raise.
The Communities and Local Government Committee recently went to Sweden where people’s income tax demands include an amount for central Government, an amount for the county, and an amount for the municipality. The amount paid to the municipality is greater, because the services it provides cost more and are more important to local people. That is how Sweden operates. I know that the Political and Constitutional Reform Committee has looked at designating a certain percentage of income tax for local councils. That is a step forward, but why can councils not vary things? If councils want to vary services and local people want better services and to pay for them, why can there not be differences in different parts of the country? That is a challenge and a debate to be had. There is no one solution at this stage, but at least let us start to think radically about a way forward. We cannot simply go back to the idea that it will all come from central Government and council tax.
We also need to reform capital finances—for heaven’s sake, the cap on the housing revenue account is nonsense. Everyone who has looked at the issue can see that prudential borrowing rules apply to every other aspect of local government finance in the capital, apart from housing. Let local government be free to build the homes that people need, and let Treasury control move back from local government borrowing. The prudential rules exist and can be audited, and local authorities can be held to account.
Let us also hope for Government support for the LGA’s idea of a municipal bond agency, so we can return to a situation in which people can invest in their communities through bonds, with a good rate of return, so they can see where the money is going to improve services locally. There are lots of good ideas. We rightly focus on the impact of the cuts, but we should also look at how we deal with the situation in future.
The cuts the Government are inflicting on local government are unfair. There are not only cuts on local government, but on local services that people greatly value. Those cuts should not be that much greater than the cuts in the rest of government. The distribution of those reductions is unfair. At the same time, we must recognise the current situation and that we have a challenge for the future. How do we address it and make local government more financially independent? How can we give local government greater means to raise resources for their local services? If we can meet that challenge, it will be good not merely for local government and local councils, but for local communities, democracy and accountability. That is well worth debating.
I find myself agreeing with the hon. Member for Sheffield South East (Mr Betts) on a large number of his points. I am particularly pleased that he likes local income tax and the mansion tax. We clearly have a lot in common. Perhaps future campaigns will be a little different.
I have a quote on local government: “Local government is looking over a precipice. We will only be able to run statutory services such as adult social care and waste services.” That comes from a Liberal Democrat council leader, but it could have come from a local council leader of any party. We must consider that view—from the precipice or cliff—against the view that it is scaremongering. We need clarity. What is the true position? Every hon. Member who has spoken has identified the lack of transparency in the system, and I shall return to that point.
As hon. Members know, local government accounts for around 25% of all public expenditure. Given that the budget deficit had to be tackled, that was always going to take a big hit from cuts to public expenditure—I am on message now. Local government has shown great skill in reducing budgets. Committed local authorities under all parties have protected front-line services. I should like to put on the record that that is a credit to many councillors throughout the country, particularly given that satisfaction in council services has increased. Many hon. Members were surprised to hear the result of the research reported on the BBC showing that most voters believe that schools, bus services, parks, libraries and bin collections have improved in the past five years even as budgets have been reduced. Credit must be given where it is due.
Many hon. Members have mentioned bus services. I remind the House that I represent a constituency that has every type of council within it—there is a unitary authority in an urban area, and a county council and several district councils in the rural part—so I find it difficult to argue that one area needs more money than another for specific services; it is a difficult situation. Currently, the county council is consulting on the future of bus services, and it is possible that some of my constituents in villages will not be able to get to work or to access health or leisure services. The price of school transport has rocketed in price for the over-16s. That is compounded by the rising age of participation. I shall keep making the point on the Floor of the House that relatively poor hard-working families in the rural areas in my constituency are faced with bills of £450 or £750 per year for their 17-year-old to get to school. Members on both sides of the House have been remiss in allowing the age of participation to increase without putting finance in place for bus services. I urge all Departments— the Department for Education, the Department for Communities and Local Government and the Department for Transport—to talk about that together because it is so important.
Apart from cuts to rural bus services, I am faced with cuts in the urban area on routes where the buses are well used. The bus companies simply take the decision to cut the routes off without consultation, which is shocking. There seems to be no accountability. As far as I can tell, bus grants have been maintained. Some decisions are a ploy to ask for money from the local authority, but some are taken because the bus companies are not there to provide a service for my constituents.
The hon. Gentleman might recall that I spoke against scrapping the EMA because I was concerned about the impact on sixth-form choice when there is insufficient help from other services. That needs to be addressed. We have bursaries, but I thought the EMA should be reformed. I do not believe that there is enough support, particularly given the increase in the age of participation. I certainly welcome the fact that the Government reviewed the situation and put extra money into schools and colleges to help the most needy, but there is not enough money to cover the current situation, especially in rural areas.
In June, the spending round announced a further 10% real-terms reduction in core local government grant funding. The LGA analysis of the subsequent consultation covering the settlement funding assessment showed that money received up front will be reduced by 15% in real terms. The Government frequently use the figure of a 2.3% cut for 2015-16. They give the impression of a certain level of cuts, but it is all much more complex. We are told that local government will get extra money for health and social care, but then we discover that that is not all new money. We know there is top-slicing and the extra top-slicing. Councils have the opportunity to bid for lots of different pots of money, but that causes great uncertainty at a time of financial difficulties.
We have had some good news, which I notice Opposition Members have so far not mentioned, such as city deals and growth regions, which will put extra money and opportunities into the core cities outside London. That is exciting decentralisation work, and we must give credit for that important work.
Local government faces both opportunities and threats, although some opportunities can also be seen as threats. The freeze in council tax, and the extra money from the Government to support that, has been an opportunity for local councils in some respects, and I welcome the fact that residents in some of the councils I represent have benefited from the council tax freeze. On the other hand, the freeze removes democratic freedom, which is not a good thing.
A further big opportunity can be found in the merging of health and social care budgets, which is an enormous step forward of which the Government can be really proud. But no council knows how much money it will get back for social care. How can councils plan or operate in a business-like fashion if they do not have that certainty? One of the biggest threats has to be the escalating cost of adult social services. I represent an area with an ageing population, and local government has to be given enough support to bring health and social care budgets together to innovate. Local government has not been backwards in innovating over time—I think it has been the most innovative part of government—but the Government should work with local government to ensure that we bring out all the opportunities that are available.
I agree with hon. Members that top-slicing the new homes bonus is a threat. Allocating that money to a local enterprise partnership is an issue. I am quite in favour of LEPs, but they do not have any democratic foundation. If an LEP covers an area with several councils—a county council and two unitaries, for example—the small district councils that will lose their new homes bonus do not have a seat on the board, because they cannot all have seats on the board. I would like the Minister to address that problem. We have opportunities and we have threats, but it is the Government’s role to support councils in getting achievements from those opportunities.
The rural fair share campaign has been mentioned. I support the campaign and I know the struggles my small district councils have in order to survive, but it has to be part of a bigger re-examination of local government finance. However, it was great to get some movement and support on the problems we can all identify, regarding the extra costs of running a rural authority.
I am grateful to my hon. Friend for her support for the rural fair share campaign. One of the problems is that the Government are looking at local government finance, but they are freezing in, not just damping, the inequities that see people in rural areas, who earn less on average than people in urban areas, pay more in council tax and receive fewer services: 50% more goes per head to urban areas than to rural areas. That cannot be frozen and kept in place at a time of change; it must be unwound, and there must be other reforms.
I congratulate the hon. Gentleman on the work he has done in leading on this issue. All types of councils have their problems. This is a strong issue, and when there is a problem it does not help to build it in—the whole situation has to be opened out. I mention in passing the concern of parish councils and what will happen to their funding with regard to the local council reduction scheme. Perhaps the Minister will update us on that. I remember attending a meeting with parish councils when the Minister was answering questions on that matter.
In conclusion, local government is facing a tough situation and that has to be accepted. I agree with the hon. Member for Sheffield South East that we should look at what local government does best, pulling local government services together and providing greater opportunities to bring more services together. We believe in localism; let us enable localism to happen. By supporting local initiatives, so much more can be delivered. I agree that local government borrowing that complies with prudential rules should be facilitated. That is a fundamental principle. I want to see more services delivered by local government, not fewer—for there to be a bigger range, with better quality and other services facilitated. Sometime it is right to bring in the voluntary sector, but I agree with my hon. Friend the Member for Newton Abbot (Anne Marie Morris), who made the point that we cannot delegate everything to the voluntary sector.
I hope the Minister will listen. There is a problem. Let us recognise it and support local councils to do what they do best.
Order. A number of Members still wish to speak and the speeches so far have been rather long. I am not going to apply a time limit at this point, but I will ask Members to take no more than 10 minutes, including interventions. If they take longer, the time limit will be reduced considerably to get us to the winding-up speeches at a reasonable time for the Minister to answer what is a full debate. The clock is not going on at this point, but if Members cannot manage it by themselves by watching the clock, I am afraid there will be a time limit. Please do not take longer than 10 minutes, including interventions.
I congratulate the hon. Member for Tiverton and Honiton (Neil Parish) on securing the debate and on gaining the support of Members across the House, and I thank the Backbench Business Committee for allocating the time.
I will make some general points, but I would also like to make specific points regarding my region, the north-east, and my local authority, Durham county council. It is tempting to characterise the debate in terms of urban against rural and north against south—I can see the hon. Member for Tiverton and Honiton is smiling. We are not allowed to refer to pictographs, but when we analyse the figures produced by the Local Government Association and the Association of North East Councils, it is clear that it is not simply a rural versus urban issue—and particularly not a north-south issue—because many of the affected regions are in the south-west. Many inner city London boroughs are badly affected, as are our great northern cities.
I shall make some general points to begin with and then get down to some of the specifics about my own area. The Minister on the Front Bench is responsible for the fire authorities so I thought it would be remiss—given that we met representatives of our fire authorities this week and found that they were extremely concerned about the implications of the settlement—not to mention that issue. The scale of cuts that the fire authorities are going to have to make will amount to taking out an entire brigade from the north-east region. I am not suggesting that that would happen, but taking out the whole of the County Durham and Darlington brigade would be the consequence if the cuts fell on a single brigade in our region. The level of cuts is unprecedented. My fear is that austerity is failing, not just our region but Britain. Nowhere is that more apparent than in the evidence of cuts to local government funding.
My local authority has made written representations to the Minister, and I hope he will consider very seriously the points it has made. Indeed, after the comprehensive spending review of 2010, local authorities faced significant spending cuts in the emergency budget. We knew, and warned at the time, that these would inevitably impact on services, jobs and growth. Various figures have been quoted, but my local authority, which is Durham county council, has needed to make savings of £123 million during the course of this Parliament. That has resulted in nearly 2,000 job losses—approximately 20% of the work force—and it has certainly hit front-line services and vital support for the local community.
Along with all local authorities, mine understood that local government would be expected to contribute to reducing the national deficit, but, as a number of Members have pointed out, the consequences of this level of cuts have been astounding. Local authorities certainly did not expect to be targeted for disproportionate cuts when the Government were unable to address the problems that had to be faced in any other way.
I am worried because the Government have missed a number of economic targets that they set for themselves and because the very slow recovery we have seen—probably the slowest for over 100 years—is being exacerbated by the scale of the cuts in local authorities, particularly when it comes to discretionary expenditure. There is no money left for economic development. I see some Government Members shaking their heads, but I am afraid that that is certainly the case for Durham county council. As a large unitary council, it had a successful track record of working in partnership with both public and private sector organisations to deliver major infrastructure projects and to make a contribution towards jobs and growth. Its capacity to do so, however, has been completely taken away by the scale of the cuts.
When the Chancellor of the Exchequer told us that he intended to eliminate the deficit by 2015, he promised in the 2010 comprehensive spending review statement that there would be “fairness”. He said:
“Fairness also means that, across the entire deficit reduction plan, those with the broadest shoulders will bear the greatest burden”.—[Official Report, 20 October 2010; Vol. 516, c. 951.]
Frankly, those strike me as quite nice words, but it was a hollow promise. We now know that the Government will miss their deficit reduction plan, and it seems that the most deprived areas and the most vulnerable people are having to pay most for the Government’s extra years of austerity. Clearly, disproportionate cuts are being imposed on hard-pressed local authorities, particularly in regions such as mine. Durham county council now faces cuts amounting to more than 40% of its budget. It no longer needs to find savings of £123 million; it is now expected to find savings of more than £222 million by 2017. The austerity and spending cuts will extend into the next Parliament.
According to a report by the Association of North East Councils, the north-east region faces a “disproportionately high share” of the £5.5 billion cuts in council budgets that will be made between now and 2016. That means an average cut of £296 per household in the north-east, compared with a national average of about £233 per household. As was pointed out by my hon. Friend the Member for Sheffield South East (Mr Betts), the Local Government Association has forecast that, during the period of the current Parliament, local government’s core funding will fall by 43%. That confirms that councils are being hit harder than other parts of the public sector.
Some councils, especially those in parts of the south, have been relatively unaffected by the cuts, and are able to continue as they were before. However, the Government must listen to local authorities—particularly in areas that face challenges and are experiencing high levels of deprivation—which, along with their parliamentary representatives, are warning that such large cuts are unsustainable, and pose the risk that councils will be unable to provide statutory services.
While funding is being cut, demand for services continues to rise. More than 60% of Durham county council’s expenditure goes towards children and adults services, and the proportion is set to increase in the years to come. That is not because the council is being profligate, but because of demographic changes, an ageing population, and the fact that my area formerly had a tradition of heavy industry such as coal mining, shipbuilding and steelworks. The Government need to recognise that the legacy of that heavy industry continues to push up demand for adult social care for the elderly and disabled. Safeguarding Children is also experiencing greater demand: the number of complex cases requiring co-ordinated interventions by a number of services is increasing significantly.
My hon. Friend is entirely right. The levels of demand for children’s services, especially in complex cases and those involving a high level of need, has been growing exponentially in some parts of the north-east. In my borough of Gateshead, the number of youngsters taken into care has increased by nearly 50% in the last four years. It may be said that that is disgraceful, but if social services departments leave such children in situ with their families, the consequences are often tragic. Those increased demands need to be taken into account.
That is certainly true.
I am not arguing that certain services should be protected while others should be subjected to cuts, but the structure of the settlement has had a particular impact on services such as libraries and transport, especially school transport. Some Members have said that there is general public satisfaction with the improvements in services, but school transport has been a huge problem for me. Many people in my surgeries have complained about having to contribute to the cost of a service that used to be provided by the local authority.
There are issues around culture, planning and economic development. Vital services that the public rely on are going to have to be cut still further to accommodate great cuts as spending falls. I am very worried that when the Minister and Government Members in general analyse the costs of this, they do so in the manner of accountants, knowing the cost of everything, but not understanding the value of some of these things. The real cost of these cuts is not just to the bottom line of local government budgets, but to services and support that the most vulnerable in society rely upon. That cost is also felt in the impact on jobs and growth, which will stifle employment opportunities in our communities and exacerbate the existing north-south divide in terms of health, education and economic development. [Interruption.]
In order for local authorities to continue their vital work, the Government must stop this relentless attack on local government. The communities that are hardest hit by the economic downturn are now being expected to shoulder the burden and pay for the failures of the coalition Government’s deficit reduction plan. [Interruption.]
There are a number of key messages that I want to leave with the Minister. There are some particular things he could do, such as address issues to do with the new homes bonus and top-slicing. I urge him to reconsider his current approach and to bring forward proposals that would support all councils to protect the most vulnerable in society no matter where in the country they may be.
Order. Some Members are getting rather excited, so let me explain that we have not imposed a 10-minute time limit and I do not wish to do so. I am sure everybody will work towards helping each other by speaking for no more than 10 minutes, and I am sure you, Mr Parish, will not get any more excited about this ruling. I am sure all who want to speak will be able to do so, and if there are any problems, we will impose a time limit.
It is very easy to feel that the debate about rural and urban funding is somehow trivial or unjustified. Those of us on the Government Benches who have been fighting on this topic for nearly two years often face scepticism from officials and slight scepticism from Ministers. The implication is almost that what rural areas are asking for—0.25% of funding to be shifted year by year—is either based on faulty statistics or will have no impact. I wish to challenge that.
It perhaps feels from London as though the request we are making is very small. It feels like the tiny tip of a lever, but when the lever is 350 miles long and the fulcrum is right here in Westminster, that 0.25% makes an enormous difference, because rural areas are in an especially fragile position—more fragile than those in almost any other country in the world. This was, of course, the first country to industrialise, and the first country to develop a truly urban population. In the mid-18th century, a sixth of the entire population of Britain lived in London. As a result, this is not France; we do not have vigorous, rich rural communities and local democracies and huge local populations. We do not have, as they do in France, 10% of the total population working on the land. Instead, we have been struggling for a very long time.
We must add to that the current perfect storm, which is to do with not simply the Minister’s portfolio, but what is happening to rural areas in health, where we are being significantly underfunded, in education, where we are being significantly underfunded, and in terms of our demography: we tend to have an older population, and we tend to face greater struggles with fuel poverty, with unaffordable housing, and with problems that other colleagues have raised to do with bus services. The Minister is dealing with a situation that is extremely dangerous, therefore.
This 0.25% matters because rural areas are precious. They are precious and they are fragile, and they have never been so fragile. They are being depopulated; we can walk across the English and Scottish borders and see houses abandoned and see parishes that in 1850 had 2,500 people but now have just 300. In those valleys are the very last traces of our history and of our landscape, which we in this House do not wish to turn into a wilderness.
It sounds like a very grand statement to come down to 0.25%. It sounds as if it is perhaps being a little petty to say that rural areas should not make this small demand just because they pay more in council tax, receive fewer services and earn less. But it is a demand that is very consistent with the traditions of my party, of this House and of this country. What I believe we all share in this House is the sense that rural areas should not be seen as marginal victims. Just because we mostly live in cities and just because 97% of the population tend to live in more densely packed areas than almost anywhere else in Europe, we should not patronise those areas.
Eden district council is the most sparsely populated council area, containing the most sparsely populated parish in the whole of England. When we see the kinds of things that Gordon Nicolson, the wonderful leader of the council, or Councillor Kevin Beaty struggle with, we see that they what they are struggling with is not simply being victims, but the possibility of being the future of this country—somewhere we can be proud of, somewhere the Minister and everyone in this Chamber can visit, and somewhere where 9 million tourists a year come to see living Britain. They wish to see not a wilderness but a rich community of houses, schools and living people. On that quarter of 1%, I ask the Minister please to be generous.
It is a pleasure to follow the hon. Member for Penrith and The Border (Rory Stewart), who made an eloquent case for rural communities. I congratulate the hon. Member for Tiverton and Honiton (Neil Parish) on securing this debate, as it gives me the opportunity to detail for the Minister the key finance issues facing my local authority, North Tyneside council. I am glad the hon. Gentleman did acknowledge the similarities of the things experienced by rural communities and deprived urban areas such as those in the north-east. I also wish to support the words of my hon. Friend the Member for Easington (Grahame M. Morris) in the case he made on behalf of the fire services. Our group received a presentation from our regional fire services earlier this week, where we saw the devastating effects the cuts are having and the fact that, again, it will be areas of deprivation that are put in more danger because of the cuts.
The Association of North East Councils has found that, nationally, the north-east has suffered the biggest cuts and has experienced much higher reductions in spending power than the national average. That has been said before. In North Tyneside the spending power per household is the worst in Tyne and Wear, as at £2,048 per household it is £468 per household less than our best-funded north-east neighbour, Newcastle. Moreover, North Tyneside council will have to make efficiency savings of £20 million for next year’s budget, which equates to 11% of the net revenue budget. At the same time, it will see a £12 million reduction in the revenue support grant—a reduction of just under 20% for the year. Announcements made in the Government’s spending review mean a 10% cut to core funding for councils in 2015-16, but the Government are now proposing a further £l billion cut for the north-east. For my borough that means a 40% cut in revenue support grant over two years.
The Government’s intention to protect council tax freeze grant might be good news in affluent areas that have higher council tax bases, but it is not in North Tyneside, especially as council tax support grant funding is being considerably reduced. I am not attempting to paint North Tyneside council as a whingeing council; on the contrary, the council has implemented savings over the first two years of the spending review totalling £32 million. By the end of the year, the efficiency savings will be £45 million. Furthermore, the council has implemented many of the saving ideas included in the Department for Communities and Local Government’s “50 ways to save” publication. Further cuts can only mean cuts to services, which will hit the most vulnerable in our communities hardest and will cost jobs in our region that we can ill afford to lose.
Like so many councils across the country, North Tyneside is seeing the rise in demand for adult social care that has been mentioned by so many Members today. The fact that young people with complex needs and many older people are living longer is to be celebrated, but that means that councils have to spend more of their budgets on adult social care. The DCLG must work with other departments and organisations to find a sustainable solution for funding adult social care so that increased life expectancy equates with a good quality of life for all those with social care needs.
The new homes bonus has benefited North Tyneside, providing specific funding to help the council’s economic growth priorities. However, the way in which the scheme is operated has resulted in the redistribution of funding from more deprived to less deprived areas of the country. The effect of that redistribution is that North Tyneside will lose about £1.6 million next year. Furthermore, the council is concerned about the recent technical consultation on the new homes bonus and regional growth fund to transfer 35% of the new homes bonus to our North East local enterprise partnership in two years’ time. Surely the Minister will agree that that goes against a core rationale of the new homes bonus scheme, which is to incentivise local authorities to encourage the building of new homes and to tackle long-term empty housing. That prompts a question for the Minister: where is the localism in making less money available for councils so that they have to make decisions on their spending priorities?
North Tyneside has always been a good, forward-looking council providing good levels of service across important areas, including social care and education. The council is not asking the Government for handouts but, like other councils in the north-east, in rural areas and in other urban areas, is simply asking for a level playing field on funding in these times of austerity.
It is a pleasure to support my neighbour, the hon. Member for Tiverton and Honiton (Neil Parish), who secured the debate, and to echo some of his points. I also want to pay tribute to the hon. Member for Sheffield South East (Mr Betts), who is not in his seat at the moment but who made a powerful speech, drawing on his many years in local government. It was completely impartial in being equally rude about everyone as he set about his exposition of local government and he made some good points.
I am as committed as anyone on these Benches to the Government’s drive to get the deficit under control. It was inevitable that local government would play its part in the deep cuts that had to be made to public services in the course of the past three years. Local government has played its part; big cuts have been made. In my county, Devon, we have seen cuts to bus services, children’s services, libraries, social care and many others. As the polls to which other participants in the debate have referred are showing, we have just about got away with it. The public are still with it and are still expressing confidence in the services that local government is providing, but, looking at the funding settlement for this year and what that will mean for councils in the next three, I sincerely doubt that another poll taken in three years’ time would show anything like that satisfaction level. I believe that councils up and down the country, regardless of their political leadership and of whether they are in rural or urban areas, have set about driving down their costs, have done everything they plausibly can to secure better value for money and have struggled, as far as they are able, to do so without damaging front-line services. But we have got way past the point where they can be expected to do so again without its having a profound impact on front-line services. I simply do not think that the Government will get away with this if they go through with it on the scale they are currently planning.
People have stomached, more or less, the austerity measures of the past three years because they have seen the grim economic picture that has made them necessary, but as more and more Government spokesmen get up and, rightly, talk up the fact that economic recovery is showing signs of getting under way—we would all hope that that continues and gains momentum over the next two or three years—it will become increasingly inexplicable to people that their public services are being eroded to nothing. I echo the comments made by others when I say that people come to my constituency surgery and say, “It is all very nice having a shiny bus pass, but it is not a lot of use if there isn’t a bus that I can catch.”
Speaking personally, the road outside my house has now collapsed on both sides. There is a sheer drop. There is just about a car’s width that it is possible to drive on. I have asked the county council when it intends to repair it and I am told it will not be repaired for two years. If that is typical of what is going on, particularly in authorities that, like Devon, have vast expanses of highway to maintain, the public will not tolerate it, and neither should those who represent them. That reflects the dissatisfaction that we have heard from many Members during this debate.
By 2015-16, Devon county council’s revenue support grant from Government will have been reduced by around 60% in just four financial years. It will have to make another £113 million of cuts in the next three years, on top of the £100 million of cuts that it has already made. We can talk about tough choices as much as we like, but we are going to see complete areas of public service ceasing altogether. I do not believe that the public understand, are ready for or are in any sense willing to put up with that.
The situation for the district council in my area, North Devon district council, is just as bad. It will have experienced a 40% cut in the Government grant to its services, and that will mean that by 2015 the size of its budget will have come down by a third in cash terms since the start of this Parliament.
All this suggests to me that although cuts across the board are absolutely necessary, the Department for Communities and Local Government is taking more than its fair share of the cuts, even in the grim scenario that we are all familiar with.
But the main purpose of my contribution to this afternoon’s debate is to flag up in absolutely clear terms that the disparity between the treatment of rural and urban areas is simply no longer tolerable. It cannot be right that the grant support coming to people living in a rural area is 50% less per head than that going to people living in an urban area. That is £130 a year per head less grant support coming into rural areas than goes into urban areas. In consequence, people are paying £83 more on their council tax bill.
The rural areas of England and Wales are the poorest in the country. That takes a bit of getting one’s head round, but it is a fact. The next-door district to mine, Torridge district council, has the lowest GDP per head of any district in the entire United Kingdom. People come to Devon and Cornwall in the summer; the sun is shining and they think those counties are affluent. They are not. Devon and Cornwall are the two poorest counties in the country.
Now will somebody tell me why the people who earn the least in the country pay the highest council tax, get the least support from Government and get the thinnest and most hopeless level of public services back? It just is not right that public services in our area are so much thinner than they are in other areas. It is not right that there are so few social workers going out to deal with children. It is not right that there are so few buses. It is not right that I have had people moving into my constituency with disabled children who, about a year later, have said, “It is hopeless. It is impossible to bring up a disabled child in this county. We are moving back from where we came.” It has been going on for decades. It was hidden during the years when local government was getting bigger and services were growing, but it is all too horribly visible now, when everything is getting smaller. A number of us warned Ministers this spring, when they pushed their spending settlement through, that they needed to get back to the issue and sort it out before they came looking for our support again next year.
I congratulate my hon. Friend on a passionate and well informed speech and on his becoming a chairman of the rural fair share campaign. Does he remember that beautiful summer of 2012, when the Government looked again at rural areas and decided that sparsity should get greater weighting, and then at the end of a year damped it all away and now propose to freeze that injustice, that inequity, all the way to 2020? It cannot be tolerated.
I am grateful to my hon. Friend for his intervention. I do remember the Department taking the issue away and coming up with a partial solution. It was going to give greater weight to the sparsity factor. I thought that was a welcome sign. I would not have expected that to happen under a Labour Government, but I was delighted that when the Conservatives and the Liberal Democrats formed a Government together, the Department for Communities and Local Government finally had a look at the issue and came up with a workable solution.
What then happened is that the urban lobby beat a path to the Department’s door and said, “Up with this we will not put.” In its place came something called damping. In my experience, damping was meant to damp the effect of a change that was being made. It was, in a sense, a transitional relief so that the adjustment would be made in stages, but the difference that damping has made in these circumstances is that it has completely reversed the effect of what the Department had done and made it ever so slightly worse.
Time is running out. There are a couple of months left before we see the settlement for next year. I listened to my hon. Friend the Member for Tiverton and Honiton explaining the demand of the campaign—that by 2020 we want to have reduced the funding gap from 50% to 40%. Politics is a team game, so I am playing along with the team. I think that is horribly under-ambitious. The Government should sort the whole bleeding thing out straight away, but I am playing a team game.
To conclude, the poorest people are paying the highest council tax, getting the least support from Government and getting the thinnest service. It is not right. Do not ask me to vote for it again in the Division Lobby next spring.
I remember clearly in 2004 when Carolyn Downs, the then chief executive of Shropshire council, presided over an increase in council tax of 16.6% when the council was controlled by Labour and the Liberal Democrats. Carolyn Downs has gone on to be chief executive of the Local Government Association, but when she was the chief executive of the council her salary was £160,000. I make that point at the outset because I feel strongly that we need to get back to a system in local government in which there is close scrutiny and checks of individuals’ salaries. A salary of £160,000 for chief executives was unacceptable. There was a massive number of managers involved, and I would go so far as to say that there was a certain amount of empire building. We have to get back to ensuring that the money spent goes directly on providing services.
I am extremely pleased that the Secretary of State, the Department and the Minister have encouraged councils to freeze their council tax and to try to reduce the bloated bureaucracy and excess management in local government. Now we are implementing a certain number of cuts, but when we are back to full prosperity, the economy is growing and the country is doing well, I hope we will not go back, having the comfort of economic prosperity, to the bad old days under Labour, when money was poured into local councils without some form of evaluation and critique of how that money is spent and without ensuring that councils are run like efficient businesses, as other sectors of the economy must be.
I am surprised that my hon. Friend implies that local councils are over-bureaucratic. I know that I am new to the House, but before that I was a councillor in my borough, where I found that everything was run far more efficiently, far more quickly and far less costly than everything run around here. If the Minister would like to visit Eastleigh borough council to see how to run something efficiently, he would be extremely welcome. Perhaps we should return business rates to the control of local district councils, where the money would be used far more efficiently, effectively and quickly than it would if it was left to bob back and forth to London.
I am grateful to my hon. Friend, because he leads me succinctly to my next point, which has already been made. An ICM survey has revealed today that six out of 10 people think services are better now than they were in 2008. That raises the following question: how is it possible that the majority of people in the United Kingdom think that services are better today than they were five years ago, when massive amounts of funding were going to local government? I will outline the situation in Shropshire later in my speech, but we must not forget that important survey finding.
I congratulate my hon. Friend the Member for Tiverton and Honiton (Neil Parish) on securing the debate and agree with him wholeheartedly. I would like the Minister to take away our message that more needs to be given to rural authorities. The cost of providing services is massively greater in rural areas than it is in cities and inner-city areas. I have made that point repeatedly to the Prime Minister, because it is something I am passionate about.
My No. 1 pledge to my constituents at the last general election was to try to get the funding formula for education provision changed. Shrewsbury receives £4,200 per child each year for their schooling. Other parts of the country get £7,000, £8,000 or £9,000. Of course we understand that children in very deprived inner-city areas might need a little more than we get in Shrewsbury, but not double. It is completely unacceptable in this day and age to have such discrimination against children in one part of the country. They are receiving less than half what children in other parts get. There are schools in my constituency that have nothing like the facilities that schools in inner-city areas have. There are leaking roofs, problems with insulation and all sorts of other problems, which I think is absolutely disgraceful. I will not stop until the funding mechanism is changed and children in Shrewsbury get a fairer deal.
I pay tribute to the leader of Shropshire council, Mr Keith Barrow, who has managed to grapple with the massive cuts imposed by central Government. He has had to cut £87 million from spending, and there are more cuts to come, but he has done so by cutting waste, reducing the number of senior managers and reducing salaries. All that has been done while council tax has been frozen, which is an extraordinary accomplishment. I receive very few letters from constituents complaining about local council services. Actually, as with the national opinion poll, people in Shrewsbury are rather pleased with local services and understand the difficult situation the council is in.
The point I want to make most strongly to the Minister is one that the leader of my council has told me. It is now starting to sell assets in order to reduce the massive debts to the Government that were racked up under Labour. A large percentage of the council’s expenditure goes on servicing those debts. At the moment, if a council wishes to reduce some of its debts to the Government, it will be financially penalised by the Treasury, because it invokes certain clauses on early repayment, just as paying off a mortgage early incurs certain financial penalties. I think that is wrong. The Minister has to look at the issue and negotiate with the Treasury. If a local council is attempting to reduce its historic debt and pay it off slightly earlier by making difficult decisions on sales and streamlining various services, it is very important that the Minister does everything possible to encourage the council by helping it negotiate with the Treasury on those early payments.
I would also like to pay tribute to Helen Ball, the chief executive of Shrewsbury town council, and Peter Nutting, who has run the council extremely well for many years.
Let us not forget rural broadband. I hope the Minister will talk about what additional support is being given to rural broadband, which is so important to so many of our constituents in outlying rural villages.
I reiterate the point that has been made about the importance of helping rural communities with large numbers of senior citizens. Shrewsbury has been voted one of the most attractive towns to live in. It is in the top 10 in England and is one of the most attractive towns for senior citizens to retire to. Let us not forget the additional expenditure required for areas with a large number of senior citizens.
Shropshire council and Telford council stand side by side. I hope the Minister will explain what incentives—what carrots and sticks—he is using to make sure that local neighbouring councils pool resources. The possibility of a shared chief executive has been mentioned. It is vital that the Department does more to encourage those two Shropshire councils to pool their resources and make cost savings and even to merge, if necessary.
Finally, on fire service provision, the Minister has kindly agreed to meet the local Shropshire fire authority. It has complained about the number of cuts it has had to go through and a fire engine is at threat in Shrewsbury. I hope the Minister will look kindly on us when we go to see him about the very important requirement to save that fire engine.
I congratulate my hon. Friend the Member for Tiverton and Honiton (Neil Parish) and the rural fair share group and our chairman, my hon. Friend the Member for Beverley and Holderness (Mr Stuart), who has been the spiritual leader of our campaign to draw Ministers’ attention to the injustice—that is not too strong a word—that many rural district councils feel about the settlements over the past two years, particularly the freezing until 2020 of our iniquitous position.
I want to pay tribute to one particular rural district council in my constituency, namely Mid Suffolk district council. It is a small district council, but under the exemplary leadership of Councillor Derrick Haley from Thurston it has done a lot of what the Government want. It is a Conservative-led council—not that that is a particularly important thing to note—and it has been following the strictures set by the Secretary of State and the Minister. In particular, in less than two years it has effected a collaboration with the neighbouring Babergh district council, so the two councils are still sovereign councils but they operate as a single delivery organisation.
I will give some remarkable statistics on the efficiency savings that Ministers have rightly demanded of Mid Suffolk district council. It is not one of those district councils that is sitting on piles of reserves. The Audit Commission’s financial ratio tools show that the council’s usable reserve levels, compared with gross expenditure, are under 10%. That compares favourably with the district council and statistical nearest neighbour average of nearly 25%.
One result of the work that has been done by Councillor Haley, the chief executive, Ms Charlie Adan, and the rest of the council is that the management headcount is down by 50%, with further reductions projected. There is now one chief executive for two councils, rather than two. There has been a comprehensive review of all other staff and there has been an 11.2% reduction in the staff headcount. There has been a 9% annual net revenue saving. Solely through collaboration with the neighbouring council, Mid Suffolk district council took £1.3 million out of what was already quite a small budget in 2012-13, which is more than was anticipated in its business case. Another £1.3 million of savings is anticipated in 2013-14. That might rise to £1.6 million.
The target of the rural fair share campaign is to reduce the rural penalty from 50% to 40%. I was delighted to hear the hon. Member for North Devon (Sir Nick Harvey) say in his excellent speech that that might even be a little complacent. I am with him in spirit. I look forward to his leadership as the new chairman of the group.
I want to underline an important point that has been made by other colleagues in this well-informed debate. In the 2013-14 settlement, the impact of the sparsity element was approximately doubled. That good news offered a huge ray of hope, as my hon. Friend the Member for Beverley and Holderness said in an intervention. Mid Suffolk district council was pleased with the news. However, nearly all the changes to the formula for that financial year were damped away. The calculation that I have seen is that three quarters of the gains that rural councils expected from that sparsity change were damped away. To put some numbers on that, damping cost Mid Suffolk district council almost £800,000, which amounted to 16% of the council’s grant. I wonder how the Minister can justify that.
The proposal to top-slice a significant sum of the new homes bonus that would have gone to district councils and put it into the single local growth fund for the LEPs will have a severe impact on the medium-term financial plans of Mid Suffolk district council. The inclusion of the NHB in the new growth fund will potentially damage the growth prospects in two-tier areas such as mine.
I understand why the NHB is being vired over to the LEPs: it is meant to facilitate better collaboration between the local authorities in LEP areas. However, there is a justified view that that amounts to a penalty on district councils. Why so? The Government believe that it will reward LEPs in areas where authorities have delivered housing increases. However, it is not easy to see how the LEPs add much value to increased house building, because that is what councils do. Mid Suffolk district council is being bold and saying that new houses are needed in its area instead of acting in a nimby-like fashion. It seems to me that the LEPs are being rewarded with the power to redistribute income that they have not had much to do with generating through the building of more homes.
Mid Suffolk district council’s view, with which I agree, is that if the LEPs are to be given that power, as is proposed, we should measure their productivity to work out what they actually do in exchange. As far as I can see, there is no measure of productivity at all except the number of new houses and the amount of money that will be generated through the new homes bonus, which is what councils do.
Furthermore, it is important to understand that if the money is given to the LEPs—in my case, the LEP covers the whole of Norfolk and Suffolk—it will work against localism, which should surely dictate that the rewards go to Mid Suffolk district council for achieving more house building. They should not be put into a pot for the whole of Norfolk and Suffolk for the LEP to do with as it sees fit.
Mid Suffolk district council is innovative and has helped to deliver the astonishing and heartening statistic in the BBC-ICM poll published last night, which is that in the majority of services—potholes and services for old people are the exception—six out of 10 of our fellow citizens believe that services have got better in the past five years, notwithstanding the fact that austerity started to kick in in 2009 and accelerated from May 2010.
I am just coming to the end of my remarks, so I will continue if the hon. Gentleman will allow me.
That amazing result is being delivered by go-ahead, innovative councils under great leadership, such as Mid Suffolk district council. On top of my remarks on the new homes bonus and my plea for the Minister to look again at the effect of damping, through which Ministers gave to rural district councils with one hand and took away with the other, I end with a final plea. My hon. Friend the Member for Penrith and The Border (Rory Stewart) rehearsed a statistic that those of us in the rural fair share campaign know off by heart—that a 0.25% shift in the allocation would go a long way towards closing the rural penalty. I particularly look forward to the Minister’s answer to why that 0.25% out of a very large budget cannot be delivered to rural shire district councils, particularly those such as Mid Suffolk.
It is a great pleasure to take part in this debate. I apologise for my late appearance.
I begin by congratulating my hon. Friend the Member for Tiverton and Honiton (Neil Parish), who secured it and, I know, led it off ably. I am delighted to follow my hon. Friend the Member for Bury St Edmunds (Mr Ruffley), although I should say to him that I have not ceased my duties as a chairman of the rural fair share campaign but have been joined by another co-chair, along with the hon. Member for Workington (Sir Tony Cunningham). It is a full, cross-party campaign recognising the inequity in funding.
My hon. Friend the Member for North Devon (Sir Nick Harvey) put his finger on the core point in his passionate speech. The lowest incomes are found in rural areas, so there is a social justice argument along with the data that we rightly focus on. That social justice argument is hard to rebut, and Ministers in successive Governments have hidden behind an obfuscation of numbers and data. As he said, the simple truth is that people on lower incomes are paying a higher level of tax to get a much thinner—I liked that phrase—level of services.
My aim, along with my co-chairmen, is and always has been to try not to have a Labour-urban versus Tory/Lib Dem-rural battle—although that is difficult to avoid—but rather to say that we will get our arguments right. Perhaps that explains the modesty of our requests—too modest, perhaps—but our aim has always been to ensure that a fair-minded Labour Member of Parliament who does not represent a rural area would see the weight of the argument. Having come into politics, as we all do, to try to make a fairer and better society, people should see that we are not making a special, partial interest, but a case grounded in facts that will lead to a more just outcome.
Does the hon. Gentleman accept that deprivation levels in the city of Hull are higher than those in his constituency, and that per head of population Hull suffers four times as much as his constituency, which—if we are honest—is pretty well-off?
Average earnings in rural areas are lower, not higher. It is a myth; there is no rural idyll. In truth, the areas around Withernsea, Patrington and other villages contain people on similarly low incomes to those in the hon. Gentleman’s constituency in east Hull, but who spend a much higher percentage of their income on transport. They are suffering too, and local government funding starts from a much lower base. Is the population more or less resilient? In my constituency, the population in rural areas—in marked contrast to the hon. Gentleman’s constituency—is much older. There are vulnerable elderly people on low incomes who are remote and without access, and who have a council with massively less funding to deliver services.
In no way do I seek to suggest there are not serious social problems in east Hull, or that such problems could be of a different character to those faced by people in Beverley and Holderness. My hon. Friend the Member for North Devon thinks we were too modest in our request, but we are saying that the rural penalty of 50% more per head going to urban areas than goes to an older population with lower incomes in areas where services are more expensive to deliver is just not right.
I have always said that if someone showed me the evidence base that such a system is just, I would not, on behalf of my constituents, love it, but I would hear the case. However, no one, including Ministers in this Government and the previous one, has ever sought to do that because there is no justification for it. If we look at the cost of emptying the bins, supporting domiciliary care for the elderly population and so on, current differences between services that are comparatively well funded in Hull and less so in my patch cannot be justified. However, the point is to avoid a battle or denial of the genuine issues that the hon. Member for Kingston upon Hull East (Karl Turner) faces in his constituency, and to seek to move to a more needs-based system, grounded on people’s real lives, rather than an argument based on a high ideological point.
I have probably already spoken for half the time I am allowed, and I shall seek not to be like some hon. Members who ignore strictures from the Chair and carry on regardless. I know that the person in the Chair will not allow such a thing to happen. However, I make no apology for repeating that, on average, rural residents earn less than those in cities, and they pay council tax that is £70 or £80 higher per head—if we add up the people in each household who pay council tax, it is significantly more, yet urban areas receive Government grants that are 50% higher than those in the countryside.
Last year I led a delegation of rural MPs to meet the Prime Minister. We spoke to him and were delighted. There was no transformation, but perhaps hon. Members remember the summer—the beautiful summer of 2012 with the Olympics, good will; London Underground staff were nice. It was an astonishing and remarkable period. The capital was covered in magic dust. It was lovely. At that time, the Government suggested that they recognised rural sparsity. They did not go all the way we had hoped, but there was a movement in the right direction after years of it being skewed the other way.
Colleagues have said that it was damped away, but it was not damped away—it was stuck in a deep freeze. Damping is a transition mechanism. I would like the Minister to justify the fact that a transition mechanism has been used to shove an inequity that the Government recognise into the deep freeze.
As my hon. Friend says, they have shoved it into the deep freeze for seven years, to 2020. The Prime Minister and the Deputy Prime Minister have been led to believe that there is no fundamental injustice, which they repeat, but the Government recognise the injustice. Perhaps it was just the magic dust, but they saw the injustice last summer. By Christmas—poof!—it had gone. Remarkable! They damped it away, which is inexcusable and cannot be defended.
That is why I am delighted to see this brave and excellent Minister in the Chamber, a man who effortlessly survives a reshuffle, who grows in power and influence, and who works for an even wiser and more sagacious man than he—the Secretary of State. It is those two honest fighters for truth and decency in whom I put my trust, almost entirely. There is no need to nudge such fine people, but if a nudge were required, I can tell my hon. Friend that, as far as my office knows, 115 constituencies have parliamentary petitions calling for a 20% reduction in the rural penalty from 50% to 40%. Many colleagues have spoken today, but many who are not in the Chamber are strongly onside with that campaign. No nudges whatever are necessary to Ministers such as this one. However, I say to him that the patience, even of the most trusting and loyal people such as the hon. Members to whom I am referring, can know a limit. We do not want it tested. We want the Government to do what they said they would do last summer, when the magic dust reigned. Can we return to that?
The Minister smiles, and I trust in him to do the right thing. We cannot allow the freezing of that injustice and inequity until 2020. Having a slow unwinding of a situation that the Government have recognised is wrong will not undermine the move to business rates retention. I therefore hope he does not repeat the suggestion that it will.
I have one final request of the Minister before the end of my speech—I have not quite had my 10 minutes. Will he produce an analysis of the rural/urban funding split? The Rural Services Network, which we work with, has worked hard attending meeting after meeting. The Minister has been in meetings in which he has asked civil servants to produce such an analysis, but for some unknown reason it never quite comes out. I would like to ensure that, whatever the Government decide, we are at least technically on the same page and can agree on where the money goes, as in the percentage that goes here or there and the amount per head, using whatever classification he wants, as long as it is on a rural/urban split. So far, we have heard the Government say, “We don’t split it like that. We don’t recognise your figures.” We ask, “Are you saying that our numbers are not true?”, and the Government say, “We don’t split it like that,” which is nonsense. We now have such experienced and first-class Ministers in the Department that we can expect action. I want to ensure that we are on the same page technically, then we can have the political argument on the right thing to do. All hon. Members, whichever constituency we represent, whether it is Kingston upon Hull East or Beverley and Holderness, want a just settlement that ensures we have decent local services and that supports people, not least those with least.
It is a pleasure to follow my hon. Friend the Member for Beverley and Holderness (Mr Stuart), not only because he made a powerful speech, but because he is the co-chairman of the rural fair share campaign. I am sorry that he is still co-chairman: I had hoped that by now he would have lost his job. I say that not because he does not do a great job, but because I too remember the magic of last summer—the sun shining in the sky, the London Olympics, and the promises from the Government and their recognition that communities such as the one I represent have had a raw deal for far too long. Public services in Lincolnshire and many other shire counties cost at least as much, if not more, to run than they do in urban areas, but urban areas receive this fantastic extra grant from the Government of 50% more per head, while those on the lowest incomes can be found in the rural communities we represent.
Like every other MP with a rural constituency who has spoken, I tell the Minister that we have to do something about this. It does not matter who has been in government, this injustice has gone on for far too long. Our constituents do not deserve the thin services that the hon. Member for North Devon (Sir Nick Harvey) mentioned, any more than constituents in urban areas deserve them. We deserve precisely the same public services and I therefore support in full the campaign that the hon. Gentleman and his colleagues are running and to which I have signed up. It is time that this injustice was removed.
I have nothing new to say to the Minister other than what has already been said. Every hon. Member has recognised that we are in difficult financial times—times of austerity—and has taken solace from the fact that the vast sums of money that were poured into local government evidently did not deliver brilliant public services because the removal of those sums, as we now know from the BBC/ICM poll today, has not made people dissatisfied with the local public services they receive. In those circumstances, in which local councils—especially in rural areas—have made the sacrifices, efficiencies and economies that they were asked to make, is it really too much to ask the Government to give them the settlements that they deserve year on year so that they can deliver the public services that constituents who live in rural communities deserve?
I venture to suggest to the Minister, sagacious as he is—
Indeed, and the Minister is well able to survive a reshuffle, as we now know. I could praise him more, and if it would get us what we want I would gladly do so. I have nothing new to say to him, because the figures are available. These are the poorest communities in the country and they get the roughest deal. On average they pay £75 more per head in council tax than anywhere else. The Minister has to deal with this. He has heard the strength of feeling on both sides of the House—this is a cross-party campaign, as he knows.
Patience is wearing thin. If the Minister comes to the House next year with a settlement that is fundamentally unfair for rural communities, such as those in North Kesteven district council and in a small part of South Kesteven, and if the funding settlement next year penalises rural communities again, which are already hit hard by the cost of fuel given the amount of travel that people in them have to do, he will not have an easy ride. I very much doubt that he will even find support. Today he needs to stand at the Dispatch Box and tell the House that the magic dust of the summer of 2012 has miraculously been found again and that the damping that has been used to rob Peter to pay Paul, when we were promised so much last year, will be addressed and not entrenched in the way the Government currently suggest for the next seven years.
It is a pleasure to follow two such eloquent speeches by my hon. Friends the Members for Beverley and Holderness (Mr Stuart) and for Sleaford and North Hykeham (Stephen Phillips), touched by the very magic dust that they invoked in making their case so strongly. I congratulate my hon. Friend the Member for Tiverton and Honiton (Neil Parish) on securing this debate and thank the Backbench Business Committee for granting it.
The topic of how we fund our local authorities may sometimes seem arcane—a matter for policy wonks or political theorists—but as earlier contributions to the debate have shown, it is in fact intensely practical, with real and direct implications for services in all our constituencies. I am grateful to my hon. Friend the Member for Penrith and The Border (Rory Stewart) for making such a strong case in principle for this small amount of funding that could make a very big difference in rural areas.
In debating this subject, we touch on the very machinery of the country and the whole range of services on which our electorates depend. I do not make the case for endlessly increasing local government funding, as perhaps some Opposition Members have tended to do. My constituents are clear in the belief that local government needs to bear its share of the burden in reducing the deficit and restoring our economic credibility, which was so damaged under the previous Labour Government.
A number of colleagues have mentioned the BBC survey, which shows clearly that it is possible to deliver improved services in difficult circumstances if we work hard at it, something that both Worcester city council and Worcestershire county council have managed to do in the past few years. In recent surveys my association has been conducting across Worcester, the vast majority of my constituents believe that local councils can do more to reduce waste and improve efficiency. Even a substantial majority of those who assign themselves as Labour voters agree with that statement.
What I will make the case for is fairer funding. Each area should get its fair share and should have the best opportunity to deliver services fairly. I am not making the case for each area to pay the same council tax, but it is noticeable that in general, as many colleagues have pointed out, the very rural authorities that are getting funded less are on average paying higher levels of local taxation than urban authorities. Surely it should be a matter for local decision makers to decide what should happen with regard to council tax and to bear in mind the wishes of the people who elect them.
Worcestershire county council has done an admirable job of keeping council tax frozen for a number of years, but it is noticeable that our council tax payers bear a higher share of the burden of the cost of vital public services in our part of the world than they do in urban authorities elsewhere in the west midlands. Worcester city council has made millions of pounds of savings in the past couple of years, but it fears that further cuts will be necessary in the years ahead as a result of not getting a fair share of funding.
I want both our councils to have the best chance of keeping council tax frozen for as long as possible, but to do so we need to ensure that we are getting our fair share of funding from Westminster. I want councils such as Worcestershire to be able to continue to have no library or Sure Start centre closures because they have managed things properly, and to receive fair funding from the Government. As others have already set out, as it currently stands the local government funding formula is not fair and it disadvantages rural areas. The huge gap—on average approximately 50% between rural areas and purely urban areas—is shocking and unjustifiable.
As a member for a city seat it may seem strange that I should be concerned about this, but Worcester, like many county towns, suffers a double penalty by being an urban district in a rural county authority. The vast majority of our funding is granted on the basis of the county unit, with little or no account taken of the many specific urban problems we face. Within Worcester, there are super output areas in the top percentile of deprived wards in the country, yet the overall funding that our local authority receives reflects what might be expected for a green and leafy prosperous county. As other Members have pointed out, rural does not necessarily equate to prosperous.
Worse, and as other colleagues have pointed out, there are additional pressures on all rural authorities, with extra travel costs for almost every part of local government, smaller units covering wider areas and particular challenges for social care. Where these costs are shared among all areas of a county, it is not surprising that the urban core can sometimes miss out. I therefore strongly support a better deal for rural areas and believe it is in the interests of all my urban constituents for the challenges of rural sparsity to be better recognised in the funding system. The local government funding formula is by no means unique in disadvantaging rural areas, as other formulae in education and health do the same. Unfortunately, these effects do not exist in isolation for each individual department, but have a cumulative impact.
In other debates, I have regularly made the case for fundamental reforms to the school funding formula, and I am grateful for the support of both Liberal Democrat and Conservative colleagues. I shall continue to make the case, but as the majority of funding for schools still passes through local authorities, this is not irrelevant to today’s debate. In fact, the growth of academies and the diminution of local authorities’ role in allocating school funding has created additional pressures as lower funded local education authorities struggle to achieve the same economies of scale as they once did.
The so-called education service grant, or the withdrawal of funding from local authorities for the funding of academies, has placed an extra burden on local education authorities in the worse-funded areas, as it has been withdrawn at a national average rate while these areas tend to receive much lower than national average funding. In Worcestershire’s case, this means that we are giving £116 back to the Treasury for every academy pupil, even though the actual funding that it would have spent in maintained schools was £101. Now is not the time for me to fulminate against the outrageous £1,100 per pupil funding gap between pupils in Worcestershire and in neighbouring Birmingham.
I pay tribute to my hon. Friend for the extraordinary role he has played in this Parliament in setting out the all-party caucus for campaigning on changing the funding mechanism. This change is the No. 1 pledge I have given to my constituents. For the record, I would like to thank my hon. Friend, and I am sure that other hon. Friends would want to do so, too.
My hon. Friend is extremely generous. I believe this campaign has strong support across the Back Benches. It is an issue that we can take forward; we must see real progress made on it. I am grateful for my hon. Friend’s comment, but it is, of course, a team effort in which many others have played their part.
In Worcestershire as in many other counties, the education department shares staff and resources with the broader children’s services area, so wherever education funding is under pressure, it places additional pressure on other aspects of children’s services, including looked-after children and safeguarding—issues raised by a number of Opposition Members. As a long-standing supporter of the f40 campaign and having met Ministers many times to discuss it, I know that reform of the school funding formula is on the way and I have every confidence that we will eventually get a fairer deal, but we need to learn the lessons of what seems to have gone wrong with local government funding and not repeat the same mistakes.
It appears that in this case the Government set out to correct some of the imbalance in funding for rural local authorities, but then introduced a damping mechanism that outweighed the impact of the change—effectively, as my hon. Friend the Member for Beverley and Holderness said, putting the whole thing into the deep freeze rather than simply damping it. In effect, a funding reform designed to move things in a fairer direction has been so watered down as to make the problem worse. That cannot be allowed to happen when it comes to school funding, and it should not be allowed to happen to the wider CLG funding for local authorities.
My hon. Friend is absolutely right; it is exactly the problem I was about to move on to. As I mentioned earlier, health funding is another area of major concern. Rural areas tend to have higher numbers of elderly people and a higher life expectancy than the major cities. As so much health funding is allocated according to life expectancy and targeted towards areas of high perceived deprivation, it means that the population of big cities is generally much better funded than that of rural areas.
With an ageing population and more people living with long-term conditions that require regular treatment, this creates enormous pressure on all rural health services, particularly on community health services. Worcestershire as a whole gets lower health funding per person than do more urban areas of the west midlands, but it has an older population, placing greater demands on our health service. Shifting the balance of health funding from mortality to morbidity would help to address this, as would having a more activity-based formula for community health. In health as in education, however, the local structures do not exist in isolation from local government. There are close links between the health and the social care systems, while pressures on both the acute and the community health systems create additional pressure on local authority-run social care. The fact that we are underfunded for health means that our underfunding for social care is a more serious challenge for our local authority.
If there is an injustice that is greater than in education or local government, it is an injustice in health. Is my hon. Friend aware of the work of Professor Sheena Asthana, who looked at Mid Staffs and other hospitals with high mortality rates and saw a correlation between the hospitals with high mortality rates and the populations they serve, which are typically older, rural and funded on an inequitable basis?
I am grateful to my hon. Friend for making that point, which clearly illustrates the problems we face.
I hope that I have shown that the problems of local government funding do not exist in isolation. The Government should strive to provide fairer funding, not just through the CLG budget but through health, education and no doubt many other budgets. We need to make sure that corrections and changes to formulae are delivered swiftly so as to correct the long-standing problems and not water them down so as to make those problems worse.
What else could we do to improve the situation? Our councils, whether they be city councils such as Worcester or great county councils, did not grow up as organs of central government. As my noble Friend Lord Heseltine pointed out in his “No stone unturned” review, the great cities of England were not grown through the diktat of Westminster or the spending of Whitehall. The councils that directed their growth and success raised their own funds locally, invested locally and built up services according to the demands of their own local constituents. We need to rebuild some of that independence and self-reliance. Although there was a great deal with which I disagreed in the speech of the hon. Member for Sheffield South East (Mr Betts), who chairs the Communities and Local Government Select Committee, this is one area on which I think we can agree.
This cannot be done overnight, and there would be significant risks in allowing some areas to raise taxes much higher than others, but it should be a stated aim of the Government to provide councils with more of their own resources over time and to give them greater opportunities to raise local funding. Such has been the growth in responsibilities of local government over the decades that there is little chance of it ever returning to being entirely self-funded, but there is a role for Westminster in re-allocating funding from the richest areas of the country to the more needy, including rural areas. Increasing the proportion of local government funding that is in the control of councils will give them greater flexibility to manage the challenges they face and to deliver localism.
Early policies of the coalition, such as the new homes bonus and the delegation of powers over business rates relief, showed some promise. As Lord Heseltine suggested, the creation of a challenge fund, or single funding pot, also offers some prospect of more locally driven projects. However, I fear that there is a conflict between the desire to empower local enterprise partnerships and enable them to bid for local funding, and the demands of our councils. I urge the Minister to give careful consideration to what has been said about the reallocation of money from planning authorities to LEPS under the new homes bonus scheme.
I believe that in the case of funding for local authorities, as in those of education and health, our Government can do more to ensure that money is allocated fairly. I commend and support the campaign of my hon. Friend the Member for Beverley and Holderness for a rural fair share, and I remind the Government that fairer funding for rural areas affects not just rural constituencies, but county towns such as the one that I am proud to represent.
It is a pleasure to contribute to the debate, and to follow the hon. Member for Worcester (Mr Walker). As a former county councillor and, now, a vice-president of the Local Government Association, I care deeply about local government, which provides essential services that many people use every day. I always find it strange that the Home Office and the Foreign Office are seen as the best and most important Departments although most people—hopefully—have very little interaction with them and their work, whereas people interact almost daily with the Departments for Communities and Local Government and for Transport.
There are clearly financial problems throughout the country, and there are places where local government spending is inefficient. The same is true of central Government spending, and of spending everywhere else. Improvements could certainly be made. In general, however, local government provides an excellent service, cheaply, affordably and very well.
Is there fat that could be trimmed from local government? Sure—but there is only a certain amount of fat, and many councils have run out of it. That is largely because councils are funded at different levels. Councils such as Cambridge city council in my constituency, which has received low funding for many years—the hon. Member for Beverley and Holderness (Mr Stuart) will be well aware of that, having been a member of the council himself—have trimmed off fat again and again. What is left is muscle and bone, and we are already cutting into that. Cambridge city council faces a cash-terms cut of almost 15% in 2015-16. That figure is much higher than the national average, and it obviously hits residents’ expectations: 15% is a huge amount of muscle and bone to cut off.
Cambridgeshire county council, on which I used to serve, is also very hard hit. Its 2013-14 settlement funding assessment has been reduced by 20.9%, which is the third highest county council figure in the country. That has put the council in a very difficult position, which I accept is slightly worsened by the £33 million that it is to be paid in settlement of a dispute about the guided busway. The busway scheme was rammed through by Conservative and Labour councillors—but that is another story.
We have a particular problem in Cambridge, because the Department for Communities and Local Government is using figures from the Office for National Statistics to work out how many people there are in Cambridge. That would normally appear to be a good thing, because we normally trust the ONS. However, the ONS has previously got the figure for the population of Cambridge completely and utterly wrong. For the last census, in 2011, it estimated that the population had shrunk by 5,000 in the last 10 years. We said that it had grown by 15,000, and the census proved that the council was correct: Cambridge had, in fact, grown. Anyone who has been there lately will have seen all the new houses and flats being built. It is absurd to suggest that Cambridge is shrinking.
We won that argument, and the census figures have been used. However, the ONS is still forecasting that Cambridge will “continue to shrink” over the next 10 years, by about 5,000 people. The fact is that we have accelerating growth: we have many, many more houses, and we expect to see even more than 15,000.
This is a huge problem, because every year the ONS figures, which the Department is using—and I can understand why—put a 2% gap between the number of people for which the Department is funding us and the number of people who are actually there. That does not take account of the fact that new growth costs much more money, and the money never arrives ahead of time. Moreover, it comes on top of the existing financial constraint caused by the Department’s settlement. The Communities Secretary is apparently over-eager to cut his own expenditure, which is very generous to other Departments but comes at great cost to local government.
There are also constraints governing what local government can raise separately. Council tax is an awfully designed tax. It is deeply regressive: the highest payers pay only three times more than the lowest payers, and the tax shot up massively under the last Government. I do not like council tax. It was encouraging to hear comments in favour of our proposal to move towards a fairer local income-based tax and a mansion tax, but while council tax remains it has to be set at a level that is fit for purpose. That has to be supported by central Government.
The rhetoric of a council tax freeze is great. The first year the Government did that, the equivalent money was provided from central Government to cover the difference that year and for the future. So far so good—but for every other year that extra funding has not been made available for councils, so many of them could not take the hit to their long-term budget of a council tax freeze.
Of course, controlling council tax increases by percentages misses the fact that different councils charge different amounts: 1% of a low-tax district council is far less than 1% of a well-funded top-tier council. The Minister described councils as democracy-dodging and trying to undercut democracy if they increase their council tax by just under the 2% limit. That is complete rubbish. How can it be undemocratic for elected officials to operate within the powers made available to them? What is undemocratic is to cut local government funding from the centre and simultaneously constrain what can be raised locally so that elected councils are forced increasingly into a place where all they can do is the statutory responsibilities—they are not free to do more.
I support the LGA’s calls for greater local autonomy to allow local authorities to help secure the financial stability and sustainability of local government. I hope we can explore this further given the Government’s commitment to localism, so we have local decision-making to make communities the masters of their own economic destinies, as the Deputy Prime Minister rightly said.
I welcome the city deal championed by the Deputy Prime Minister. The greater Cambridge city deal is well under development, and assuming the Government do the right thing and agree it, it will be a very good thing for the area. We have three very different councils coming together collaboratively to secure the future of one of Europe’s greatest hi-tech clusters, with 1,600 companies and 56,000 direct jobs in hi-tech and revenues of £13 billion. That will enable us to provide the sustainable infrastructure and the affordable housing we so desperately need to avoid stifling our own success. It will be a huge step forward. It will make it easier for the three councils to work together—although, frankly, I think a single council for the area would probably be a better way forward, but that is not on the cards right now.
The city deal is great, but there is a slight risk to it if the Government go ahead with proposals to top-slice the new homes bonus by £400 million from the councils that were expecting it and had budgeted for it. They were not expecting it to be transferred to local economic partnerships, who were not anticipating it. In our case, the LEP has written to the Communities Secretary to ask for the new homes bonus to be given to the councils, as expected. I hope the Government will agree that if the LEP says the money should be given to the councils, that is clearly right.
We also have issues with housing. In Cambridge we are building a lot more affordable housing at a great rate and some of the first new council homes for a very long time since the rules were relaxed. It is not so easy to build those houses, however. It is great that we can spend right-to-buy money on replacement housing. That should always have been the case. Right to buy was fine, but we have to build replacement homes and Governments did not do that.
The money that there is now is tied up with red tape, however. It can be used to cover only a third of the cost of the replacement, so two-thirds match funding has to be found from somewhere. That two-thirds cannot include any other grant money, however, such as from the Homes and Communities Agency. The money also has to be spent within three years or it goes back to the Government, and the Treasury’s refusal to lift the borrowing cap makes it very hard for councils to spend the money to build the houses. That must be addressed.
There is a further problem with the change in the target rent system. Cambridge took on a debt from the Treasury of many millions of pounds on the basis that it would be able to repay it from the rent. Cambridge had been debt-free and was having to pay a huge amount of, in effect, tax from council tenants in Cambridge to support council housing in the rest of the country. We made a deal with the Government based on the idea that we would move average rents towards the target rents. The Government are now threatening to freeze that process. When a house is empty we have been raising the rent to the target level, as it should be assuming the energy standards are all right. If that is frozen, different rents will be charged for identical neighbouring council houses when new people move into them. That simply does not make sense on a practical level and it would also cost the council and the housing account £22 million over the period of the business plan. More importantly, it breaks the faith that existed. This debt was taken on with an understanding of what the rules would be. If the Government are going to change those rules, it is very hard for us to keep our side of the understanding.
Education is a key local authority responsibility. Cambridgeshire county council and the city council are low-funded, low-council-tax authorities, partly because of all the years of controls on council tax, but Cambridgeshire is right at the bottom of the funding tables for schools. We get £600 per pupil per year less than the English average—that is £250,000 out of the budget of the typical two-form-entry primary school. That is not acceptable and it lets down our pupils. I do not know what pupils in Cambridgeshire have done to deserve it. That underfunding has gone on for three decades; it has been a long-term problem. State schools in Cambridgeshire have a much tougher job than those anywhere else. They do a great job given that background, but the lack of spare resources makes it far harder and we are now seeing greater problems, with people from more disadvantaged backgrounds struggling to keep up. The pupil premium helps and free school meals will help, but against a background of such a huge lack of funding it is hard.
The Government have committed to changing this formula, and I very much welcome that. A number of hon. Members have contributed to that debate, and Cambridgeshire has been particularly concerned. That change has to mean extra money coming into Cambridgeshire’s schools to end this unfair treatment of our young people. But I want to see that money in our schools by the end of this Parliament, as that is how we will know that the Government are serious about it and that they do intend to be fair to our pupils.
Lastly, let me touch on health care, because Cambridgeshire is also grossly underfunded in that area. Most clinical commissioning groups get more than £1,000 per head to spend on health care, but Cambridgeshire and Peterborough is one of the few areas that gets less than £1,000 per head. Is that a fair allocation? Has it just been worked out that we do not have people who need health care? Helpfully, the Government did publish the outcome of their fair shares formula for health allocation, which takes into account factors such as population, age, deprivation and much more. They published the figures, which showed that the amount that Cambridgeshire and Peterborough should be getting will be £46.5 million more than the current figure. We do not want to be right at the top—we would not even be at the average—but give us that £46.5 million and we could start to improve health care in an area where the health economy is really struggling. Today is world mental health day. If we are given that £46.5 million, we can make sure that mental health care in Cambridgeshire gets to the standard that people want and deserve.
Local government faces a number of problems and challenges, and Government after Government have failed to allow local government to be free to deliver what it can do for its citizens in an open and varied way: that must change.
It is a great pleasure to speak for the first time as the Opposition local government spokesman on a subject of such importance. It is very close to my heart, as I represent a rural and urban area and a local authority that is a member of SPARSE—the Sparsity Partnership for Authorities delivering Rural Services—and has supported the call for today’s debate and for action.
I congratulate the hon. Member for Tiverton and Honiton (Neil Parish) on securing this important debate and on the way in which he spoke strongly for not just his own area but rural areas across the country. He spoke for some of my constituents and those of many hon. Members, and I was pleased that he said he is not seeking to steal money from urban authorities. On that basis, I can say that, like all hon. Members, I am very sympathetic to the case he has made for a fair deal for his area.
The same case was made also by: the hon. and learned Member for Sleaford and North Hykeham (Stephen Phillips), who spoke knowledgeably about the way in which his local authority is making savings; the hon. Member for Worcester (Mr Walker), who championed localism and devolution in a way that I have sought to do in roles before I came to this place; the hon. Member for Penrith and The Border (Rory Stewart), who painted a powerful and evocative picture of our rural areas and the way they are changing; the hon. Member for Beverley and Holderness (Mr Stuart), who gave us a masterclass in how to win friends and influence people, with his complimentary appeal to the Minister’s good graces; and the hon. Member for Newton Abbot (Anne Marie Morris), who spoke for not only her constituency, but her region, giving a perspective from an area of the country that must be heard and was heard today in this House. I also welcome the way in which my hon. Friends the Members for Gateshead (Ian Mearns) and for Coventry South (Mr Cunningham) made strong interventions to argue that the unfairness is felt keenly in many areas of the country, both rural and urban, because of a range of factors. As the hon. Member for Mid Dorset and North Poole (Annette Brooke) highlighted when she talked about the range of issues that impact on local authorities, there is also an impact on town and parish councils at the first tier of local government. I was pleased to hear her put that on the record today.
My hon. Friend the Member for Penistone and Stocksbridge (Angela Smith) spoke about the rural-urban mix in her constituency. She correctly diagnosed the funding problems as being about the level of cuts overall, rather than what could otherwise be a divisive debate about rural-urban. Had she been in her place, I would have associated myself with the congratulations she offered to Sir Steve Houghton. I had the pleasure of working with Sir Steve in my former life, when I was chief executive of the Local Government Information Unit, and he is a champion for local government.
Like the constituencies of many Members in the Chamber today, my constituency is very varied. Corby is mainly urban whereas east Northamptonshire, in contrast, is a rural area. I remember that just after I was elected I had a conversation with Mr Deputy Speaker, in which we spoke about engaging with our rural areas and farming communities. I know that that is very dear to his heart.
Let me highlight a particular issue faced by my area, which was also mentioned by the hon. Member for Cambridge (Dr Huppert). He spoke about the impact on areas with fast-growing populations of the failure to take proper account of that in the funding formula. Corby is the fastest-growing place in the country and has the highest birth rate. I know that the hon. Gentleman’s constituency is growing too and we hope that the Minister will assure us that by moving away from a formula fixed to the 2012 baseline we can take better account of population growth.
I thank my hon. Friend the Member for Sheffield South East (Mr Betts) for his kind words about my new role and also, in particular, for the opportunity to serve under his excellent chairmanship of the Select Committee on Communities and Local Government, where I learned a great deal from him, as we all did today when he highlighted the scale of cuts faced by local government. With his experience of the sector in this House and as a former councillor and council leader, he warned us and the Government that we are facing a very serious situation indeed.
My hon. Friend the Member for Easington (Grahame M. Morris) illustrated the severity of the cuts when he talked about the 40% cuts his council faces. My hon. Friend the Member for North Tyneside (Mrs Glindon) spoke strongly for her constituency and the impact on her local council as well as on the north-east region. I have been pleased to receive the briefings from ANEC and to hear from many Members from that region today.
The hon. Member for North Devon (Sir Nick Harvey), in a powerful speech, predicted that complete areas of public services would cease. I was pleased to hear him praise the days when councils were properly funded under the previous Labour Government.
It is not just that funding is being cut. We all recognise that this is a time of rising pressures. In particular, Members have spoken about the costs of looked-after children and social care, which are rising. The demands on local authorities are going up while income is coming down significantly—so much so that, as my hon. Friend the Member for Sheffield South East said, the LGA’s Conservative leader, the highly respected Sir Merrick Cockell, has called the cuts “unsustainable”. The Tory leader of Kent county council states that his county cannot cope with further reductions and is “running on empty”. As the hon. Member for Cambridge said, we are now cutting to the bone in many councils.
Ministers know that local government is the most efficient part of the public sector—the Prime Minister has said so—but they decided to reward councils for that efficiency by cutting more from them than from any other part of the public sector. The Institute for Fiscal Studies is clear that the total cuts to local government spending will outpace those in the public sector as a whole. The situation will get worse rather than better. The LGA’s excellent report, “Future funding outlook for councils”, incorporates the additional 10% cut in this year’s spending review, which came on top of the 33% cut that councils face over this Parliament.
No doubt the Minister will tell us that the cut amounts to 2.6%, but councils do not recognise that figure. It does not stand up to scrutiny. The LGA estimates that there will be a £15 billion black hole in finances by 2020, but the Secretary of State has called the cuts to councils “modest”. No wonder the Conservative council leaders of Essex, Buckinghamshire, Wiltshire, Lincolnshire, Leicestershire, Kent, East Sussex and West Sussex wrote to the Prime Minister to complain about the language that is being used by Communities and Local Government Ministers, because the cuts that councils face are not modest; they are massive.
The National Audit Office warned that cuts are having a direct impact on front-line services. It warns that 12% of councils are at risk of being unable to balance their books in the future, with potentially disastrous consequences. The recent Public Accounts Committee report on the financial sustainability of local authorities found that there had not been a proper analysis of the impact of the cuts. The Committee highlighted the unfairness of the cuts to different areas of the country, and it raised serious concerns about some councils simply not being viable, such as Tory-led West Somerset.
What actions will the Government take in the event of multiple financial failures of local authorities? If the Minister will not reply to me today, I am sure that in due course he will reply to the Chair of the Public Accounts Committee, who has rightly put that question to the Government. Do the Government have a plan for what is about to happen?
The impact falls on both statutory and non-statutory services. Too often, it is assumed that statutory services will be safe because they are a legal requirement, but the truth is that councils already, throughout the country and increasingly, are restricting eligibility criteria, so older people in my constituency and those of my hon. Friends who have spoken today are losing their care. Children are losing their transport to school. The brunt of the cuts will fall on the non-statutory services that Members have mentioned, such as road maintenance, cultural and leisure services, street lighting and libraries.
We must be honest that were a Labour Government now in office, of course there would be cuts to local government. But they would not go as far as the cuts that this Government are making, and they would certainly not be allocated to local authorities in such a fundamentally unfair way. It is not just organisations such as ANEC and the Special Interest Group of Metropolitan Authorities that point that out to us; so too has the Audit Commission, which said:
“Councils in the most deprived areas have seen substantially greater reductions in government funding as a share of revenue expenditure than councils in less deprived areas.”
Perhaps it is that kind of speaking truth to power that has caused the Secretary of State to abolish the Audit Commission, which I regret.
In 2014-15, the 10 most deprived local authorities in England will lose six times more than the 10 least deprived local authorities compared with 2010-11. The councils that will suffer the biggest cuts in spending power per head, even on the Government’s own measure, which is designed to mask the real effect, are Liverpool, Hackney, Newham, Manchester, Knowsley, Blackpool, Tower Hamlets, Middlesbrough, Birmingham and Kingston upon Hull. My hon. Friend the Member for West Ham (Lyn Brown), who has also joined the Communities and Local Government team, in Newham, knows the impact of that on her constituents, as I do on mine in Corby and east Northamptonshire.
In contrast, the Prime Minister’s own local authority, West Oxfordshire, one of the least deprived in the country, ranking 316th out of 325 in the indices of multiple deprivation, is getting an increase in spending power of 3.1%. That is all we need to know about the Government’s priorities. And we know that it is not an unfortunate accident; it is a deliberate strategy. The former Local Government Minister, the hon. Member for Bromley and Chislehurst (Robert Neill), put it like this:
“Those in greatest need ultimately bear the burden of paying off the debt”.—[Official Report, 10 June 2010; Vol. 511, c. 448.]
He told us that quite clearly and frankly, and we know that in our communities.
Is that not exactly what this Government are about? They are not interested in the people in the communities that are being hit hardest. They are so brazen about it that when, earlier this year, the additional funding for rural areas was announced, they inexplicably removed Durham—one of the poorest rural areas—from that list.
Do the Government also acknowledge that it is not just councils that are affected? Costs are increasingly being passed on to our hospitals, our prisons, our police service and our welfare system. In my area, for example, the local hospital has found that it has had to pay for care home beds out of the budget for acute hospital services, making a nonsense of the Government’s claim that they have protected NHS spending.
If my party comes to power, as I hope it will, times will still be very tough and we will need to look at what we can do to help councils. First, we will need to make a reality of Total Place—of community budgets—on which this Government have sadly been dragging their heels. People may call it what they like, but the principle is absolutely sound. We must get local services properly joined up, we should put councils in the driving seat to do that, and we need truly to break down the barriers to it, not least in Whitehall.
That is why Labour will look at powers in areas such as training, skills, infrastructure, transport and investment in order to help our local authorities to get their local economies going. That is why we will return the control of back-to-work schemes to councils. That is why we will launch, with our local authorities, the biggest house building programme in a generation and celebrate council house building again across the country. That is why we will give councils the right to grow, with the incentives they need to acquire land and put in the infrastructure, and that is why we will truly integrate health and social care to realise the vision of Nye Bevan, the founding father of the national health service.
That is why we will back those things that councils are doing well, even though money is tight. We want to celebrate good things in local government, but I was very surprised to hear the hon. Members for Shrewsbury and Atcham (Daniel Kawczynski) and for Bury St Edmunds (Mr Ruffley) crowing about the BBC ICM report. I have the full survey here. In not one of the 15 service areas do the majority of people think their services are getting better. In some areas, such as road maintenance—my constituents who experience the potholes every day know about this—66% were clear that they were getting a worse service. I am sure hon. Members will have an opportunity to correct the record of the remarks that they made earlier. One thing that people are clear about in the survey is how frightened they are about the impact of the cuts that this Government are imposing.
Labour councils are working hard to mitigate the impact of the damage being done by this out-of-touch Government. That is why I am delighted that many more Labour councillors were elected earlier this year and many councils turned to Labour control. Whether we are implementing the living wage, schemes to bring household energy bills down, promoting apprenticeships, building social housing or attracting new investment into our local high streets, I am very proud of what Labour councils are doing. It helps us to plan for our return to office in 2015. That is why the work of our local government innovation taskforce is helping to shape the policies of the next Labour Government.
I have no more time.
Finally, on funding, we will review the formula. We will make the formula fairer, but for today let us accept that the Government’s approach to local government funding needs to be seen for what it really is—it is unfair and it is unjust. It is unfair to local residents who rely on local services, and it is unjust in the way it hits the poorest areas and the poorest people hardest.
First, I join the Chairman of the Select Committee in congratulating the hon. Member for Corby (Andy Sawford) on his new role. I look forward to working with him and debating with him across the Chamber. I welcome the hon. Member for West Ham (Lyn Brown) to her new role as well.
I was somewhat surprised and a little disappointed that in the speech that the hon. Member for Corby has just made in his new role, he did not get round to outlining where the £52 billion of cuts that his party would make were likely to fall. If I understood him correctly, he said that the funding formula was unfair. I wonder whether he will at some stage explain to the House why, in 13 years, his party did nothing about that and, indeed, made it worse. In his comments about how councils are currently funded and how the spending patterns worked, he did not note the fact that his own council, Corby, despite having the highest spending power per head in Northamptonshire, had an increase of about 4.4% this year, so proving that the formula is fair wherever one is.
I shall try to restrict my comments—
Let me make a start before I take interventions, depending on time. I shall try to restrict my comments to the topic on which the majority of Members have spoken today, which is rural funding, although I note and will comment to some extent on comments from Members across the Floor on local government funding generally. We also moved into NHS funding and Department for Education funding, but I will not take up Members’ time by going too far into that.
I congratulate my hon. Friend the Member for Tiverton and Honiton (Neil Parish) and thank him for bringing this important debate to the House, giving everybody a chance to comment and giving me the opportunity to listen. I have met him and the team from the rural sparsity group on a number of occasions and will be happy to do so again. No doubt we will meet again over the next few months as we get towards the funding settlement. I note that he would like an extra £30 million. I also note the realism in his comment about the chances of the Government finding another £30 million when we are still trying to clear up the debt, the deficit and the mess left by the previous Government.
I will take an intervention in a little while, if I have time.
We heard a number of interventions during the speech by my hon. Friend the Member for Tiverton and Honiton. My hon. Friend the Member for High Peak (Andrew Bingham) mentioned what small councils could do. It is worth stressing—I am happy to put this on the record again—that there are small district councils across the country, and not just in rural areas, running budgets of roughly £10 million or even less. They must look at their situations very closely and consider whether their current format, with their own chief executives, management and silo services, is sustainable. They should consider partnering with other authorities, as around 40 authorities do already, and having shared chief executives and management.
The partnerships between High Peak borough council and Staffordshire Moorlands district council is a fantastic example. My hon. Friend the Member for Bury St Edmunds (Mr Ruffley) talked about Mid-Suffolk district council, and I must say that Suffolk, as a county generally, offers a really good exemplar of the work that can be done. Suffolk Coastal and Waveney district councils are coming together with a shared chief executive. Babergh and Mid-Suffolk district councils and St Edmundsbury borough council and Forest Heath district council are all showing how to come together to make real savings.
The chief executive of a council deal such as Staffordshire Moorlands and High Peak would explain that those kinds of savings can amount to 18% or 20%. When they are running a budget of around £10 million, that is a substantial saving. I argue that small local authorities should be doing that not only because of financial pressure, but because the money could be spent on front-line services, rather than on administration and management.
Several Members mentioned school bus services. I agree that councils should be working very hard to protect front-line services that are important to rural and urban communities. In my constituency of Great Yarmouth, the Labour-led county council has looked at cutting rural bus services, which would mean children having to walk up to 3 miles to get to school, and on major roads with no pathways. That is absolutely unacceptable. It should be looking at the plans that were in place under the previous Conservative administration in order to find the savings it needs and bring in the revenue it needs without slashing those important services. Councils should look at that carefully.
The hon. Member for Penistone and Stocksbridge (Angela Smith) carefully outlined the situation with regard to funding, but we must remember that in the past year councils increased their reserves to £19 billion, the highest level on record. It is important that we also look at options. This Government are not just talking about that; with community budgets we are delivering a transformation in the way services are provided across the public sector, which independent reports show could save this country around £20 billion. Across the country there are community budget pilots, of all political colours, doing some phenomenal work, and that has now been rolled out to a further nine areas.
My hon. Friend the Member for Newton Abbot (Anne Marie Morris) touched on some of the issues relating to education, transport and buses, which I have already outlined. The Chair of the Communities and Local Government Select Committee, the hon. Member for Sheffield South East (Mr Betts), raised some issues about funding and mentioned the 56 councils. I have touched on some of the things that they could be looking at. I am not entirely surprised, although I am still disappointed, that he seems to be making the case for more taxes on people who I think want the cost of living to go down. That is why it is important that we freeze council tax and do not encourage more taxes locally.
The Minister just mentioned reserves. Does he not understand that it is not an issue of rural or urban, or Conservative or Labour? It is about councils looking at the black hole that is coming, as the forecasts show, and which the Chancellor has identified in the spending review, and making prudent decisions on how to spread the money available over a number of years in order to try to do their best to protect services. If Ministers just keep rubbishing that as councils holding on to reserves for their own sake, they do a disservice to hard-pressed local authorities.
I am afraid that I entirely disagree. Having led a local council that, before my time, had seen council tax increases of 18% and 16%—they were regularly in the double figures—and in a country where council tax doubled under the Labour Government, I believe that hard-working people think that council tax should be kept low and that councils should be looking at how they spend their money, not just building up reserves and then pleading poverty. If they believe that they are short of money, they should use the reserves they have to invest for income in the future and make savings, as many good authorities are doing.
The hon. Member for Mid Dorset and North Poole (Annette Brooke), in a very strong speech, touched on the new homes bonus, as did a number of Members. It is an issue that we are looking at. There is a consultation at the moment and the Government will of course respond to it. The hon. Member for Easington (Grahame M. Morris) referred to fire authorities, but he should bear in mind that the response to the Knight review is coming. Fire authorities were protected in order to make some of the efficiencies that they should have been making but in too many cases were not.
My hon. Friend the Member for Penrith and The Border (Rory Stewart) outlined in his strong contribution—other Members also commented on this—how he thought the funding gap should be reduced. I say to my hon. Friend that the gap between rural and urban with regard to spending per head has reduced by 4%.
That leads me to an important point raised by my hon. Friend the Member for Beverley and Holderness (Mr Stuart) in his passionate speech. I thought I was doing well with his flattery and compliments, for which I am grateful. He was clearly being sincere until he mentioned the word “svelte”; I knew then that my ego was not being brushed in the way I hoped. My hon. Friend made a clear point about the analysis. While he was away after suffering an unfortunate injury, I met SPARSE and I would be happy to go through this again. We managed to clarify the difference between how it and the Government have calculated the figures. A rural area is different for the Government, because an area such as my county of Norfolk, which would usually be classed as rural, has within it urban areas such as Norwich, Great Yarmouth and King’s Lynn, and that gives us a slightly different calculation. I would be happy to go through the figures with my hon. Friend when we get to them in a few months’ time.
My hon. Friend makes a reasonable point. I will touch on how these things come together and the work we are doing to deal with that.
The hon. Member for North Devon (Sir Nick Harvey) made a passionate and strong speech about sparsity and disparity and how they need to be dealt with. My hon. Friend the Member for Shrewsbury and Atcham (Daniel Kawczynski) made a powerful point about the chief executive of the Local Government Association, who is clearly disposed towards higher council tax charges for residents, which I think all of us—those of us on the Conservative Benches, at least—want to move away from while we keep frozen and low council tax. In some areas, good Conservative councils are even cutting council tax for their hard-working residents. I noted my hon. Friend’s comment about asset sales. I will look at that, and if he will bear with me I will get back to him on that specific issue.
My hon. Friend was absolutely right to mention incentives to pool and work together. We have put incentives in place and I will touch on them in a moment. Councils such as High Peak, Staffordshire Moorlands, Breckland and South Holland have just this week benefitted from those incentives and the money we announced.
My hon. Friend the Member for Beverley and Holderness continues to make a strong case on this issue. He has pushed it with other Members and comes to see me regularly. I have no doubt that our conversations will continue as we approach the financial settlement period over the next few months.
My hon. Friend the Member for Worcester (Mr Walker) and my hon. and learned Friend the Member for Sleaford and North Hykeham (Stephen Phillips) highlighted the cost for rural areas, particularly with regard to transport. Members representing urban areas often mention issues to do with density and poverty and how they balance out. That issue has yet to be proven with regard to cost differences and we will continue to look at it.
I gently say to the hon. Member for Cambridge (Dr Huppert) that, if Cambridgeshire is so short of funding, he might want to ask how it could afford a huge pay-off and the rather interesting system it has used to reappoint the chief fire office of its fire authority. That happened in the past few weeks and it has raised a number of questions.
I am about to turn to some more general points and I will touch on the damping issue.
I want to be clear that behind all our thinking is that it is vital for councils to continue to play their part in tackling the budget deficit we inherited from the previous Government, making sensible savings and delivering value for money for the taxpayer, as many good councils are doing. We are providing direct financial incentives for councils to promote growth and jobs in their area. This year’s local government finance settlement set out how authorities can now directly retain £11 billion-worth of business rates and keep the growth from them instead of returning them to the Treasury.
More importantly, and perhaps more relevantly to this debate and the points made by hon. Members from all parties, in the current settlement we accepted, based on the available evidence, that rural areas are comparatively underfunded. We have therefore ensured that there is proper recognition of the additional costs of delivering services in rural areas. We adjusted the relative needs formula to reflect those costs. That was one of only three formula changes in the settlement.
Members have noted the changes, but I will reiterate them. We have increased the weight of super-sparse areas in the formula; doubled the sparsity weight for older people’s social care and district-level environmental protection and cultural services; reinstated the sparsity adjustment for the county level; and introduced a sparsity adjustment for fire and rescue. As a result, funding per head has been reduced by less in predominantly rural authorities than in predominantly urban authorities within all classes. There was a 4% reduction in the gap between 2012-13 and 2013-14. I know that some Members have an issue with how that is classified and I am happy to meet them to go through that when the figures for next year are confirmed.
We listened to the representations of rural authorities on the provisional settlement in the debate earlier this year. That is why we provided a further £8.5 million grant to help rural authorities with sparse populations.
North Kesteven district council received £38,000, whereas if the sparsity factors had been properly taken into account and not been damped, it would have received several hundred thousand pounds. I say to the Minister that £38,000 does not butter many parsnips.
I do not know where my hon. and learned Friend buys his butter and parsnips, but I understand his point. The Government obviously have to ensure that there is not too much volatility in the system, but the comments on damping have been noted and I will return to them in a moment.
Hon. Members have spoken about incentives. Yesterday, I announced the successful bids to the transformation challenge award. Eighteen local authorities will share £7 million to look at ways of bringing their services and management together and working in innovative ways. We are showing clearly that councils will get what they make, rather than having to take from a begging bowl. We will reward councils that deliver. The new homes bonus and the business rates incentive scheme are part of that. Through the new homes bonus, about 40 councils saw an increase in their spending power this year. I note that one of those councils was Corby borough council, in the shadow Minister’s constituency. There are councils that need to be more efficient still. Some small councils need to do more to share their management and services. We are doing what we can to incentivise and support that.
We issued the “50 ways to save” document. I encourage councils to look at that to find more ways to save and to ensure that they are being efficient in the back office and in their services, and that they are using transparency to cut waste. The best councils are protecting the front line, including weekly bin collections, library services and meals on wheels, while getting rid of waste and inefficiency.
We are aware of the pressures that are coming. We therefore have a £3.8 billion pool of funding for integrated health and social care, a new transforming services fund, a programme that will review the pressures on children’s services, and new flexibility to use capital receipts from asset sales to fund one-off revenue costs for reforming services.
I have heard the clear and passionate comments that have been made today. We will consider them over the next few months as we approach the spending review.
I have two minutes in which to make some telling comments.
I thank the 14 Members who have taken part in this powerful debate. I welcome the Minister’s remarks, but I go back to my original argument. In 2012, the Government looked at shifting money across to rural authorities. After that they damped it, then they gave us back £8 million and now they say that they cannot even find £30 million. If it was right to do it in 2012, it is right to do it now. I ask the Minister to look at the matter again, because we will mobilise the rural yeomanry to ensure that we get our fair share of funding. We are asking for one tenth of 1% of the total budget to be shifted towards rural authorities. Is that too much to ask of the Government? I do not think it is.
The hon. Member for North Devon (Sir Nick Harvey) made the point that council tax payers pay £130 more for their services in rural areas. We therefore demand better services. Devon is the 245th worst funded area for its schools. My hon. Friend the Member for Worcester (Mr Walker) is running a great campaign on that issue.
We cannot just sit in the House and allow rural authorities and rural people to be treated in this way, so I tell the Minister that we will come to meet him again and will be looking for his cheque book. It is no good just having warm words, because we can put them nowhere. What we actually want is help—as my grandmother used to say, an ounce of help is better than a ton of pity. We want some help, not just warm words, so we look forward to a real solution.
Question put and agreed to.
That this House has considered funding for local authorities.