I beg to move,
That this House has considered local government funding for rural areas.
I begin by thanking the Backbench Business Committee for selecting this motion for debate this evening and for rescheduling the debate to a time when more colleagues could attend. I also thank my co-sponsors, the hon. Member for Workington (Sue Hayman) and the right hon. Member for North Norfolk (Norman Lamb). Their support is testament to the fact that this policy area crosses all party divides.
In my 10 years in the House, I have raised local government funding of rural areas on many occasions, but it would be fair to say that progress has been slow. Somehow, those in the countryside are expected to put up with less, whether it is poorer connectivity with broadband or mobile signals, the availability of neighbourhood policing, or affordable and convenient transport links. Indeed, in most aspects of Government expenditure, rural areas get a raw deal.
Going back to my hon. Friend’s first point, does he agree that more and more people are accessing local government services via the internet? That should be a boon to rural areas, but it has not been, because broadband in some areas does not exist, while in other rural areas it is patchy, and overall it is rather slow. He and I have worked together locally on this issue. Will he confirm that there is no reason whatever why an area that is geographically isolated should be, or should remain, digitally isolated?
My right hon. Friend is quite right. That is not the main focus of today’s debate, but that is the context in which it takes place.
We are here today because the situation I have described is also true in local government, which provides so many of the public services on which our constituents depend. The central facts for the debate are these. Urban residents receive 45% more in central Government grant than their rural counterparts and pay £81 less in council tax per head. One may say, “Well, that’ll be because rural residents are better off. They can afford it. It’s reasonable. Their needs are less”, but the Government’s own average earnings figures show that residents in urban areas enjoy higher earnings than their rural counterparts, whereas those living in areas of significant rurality are the very poorest paid. So how can it be fair for poorer rural residents to pay higher council taxes than their richer urban cousins while receiving fewer services? This central unfairness is why, in 2012, along with Liberal Democrat and Labour colleagues, I set up the Rural Fair Share campaign. For many years, rural councils have been underfunded by central Government because of historic political choices and the formidable lobbying power of metropolitan authorities.
My hon. Friend is doing a great job on this issue. Does he know that in West Berkshire and Wokingham—I am one of the area’s MPs—not only was the adult social care settlement so poor that it went to judicial review, but the Government lost, owe us a load of money, yet will still not pay?
My right hon. Friend is right. This story can be found in places right across the country, yet this inequity continues year after year. That is why so many colleagues are in their places to talk about it today.
In order to meet the shortfall in grant, of course, rural councils had to respond in the only way they could—and that was, in the past, by increasing their council tax rates. That is why the council tax base is much higher in rural areas, and modest homes in the East Riding of Yorkshire in my constituency can pay higher council tax than is paid on a £1 million property in Westminster. Under the Government’s proposed local government settlement, however, those higher taxes are being used to justify a further shift in support from rural to urban.
I appreciate the hon. Gentleman’s efforts in pursuing this matter and securing the debate. Does he share my view that the impact on social care in rural areas is particularly acute? Large travelling distances, combined with the increase in the minimum wage, increase costs further. Does he share my concern that many social care providers are thinking of withdrawing from the market because they cannot make ends meet?
My right hon. Friend is right to say that. Not only are residents in rural areas poorer on average than those in urban areas, but it costs more to deliver services there, they have to pay higher council tax and they are also older, with all the costs that go with it—driving social care. Again and again across government and across our society, we hear about the pressures that will result from having to deal with an ageing population, yet it is rural areas that have the eldest population. However, Government Departments show no recognition of the additional costs of age, as reflected in the demographics of rural areas.
In my constituency, 25% of the population are over 65, compared with Exeter, a neighbouring urban area, where the figure is only 15%. Many of my constituents are aged over 85, but it is a travesty that many funding provisions do not provide for that very expensive group.
My hon. Friend is absolutely right.
Our campaign has argued from the outset that our councils have to bear additional costs because they serve sparsely populated rural areas. Rural councils face higher transportation costs, for instance, when refuse is collected from sparsely populated villages or when children have to be transported into schools—costs that do not have to be faced in an urban setting. As my right hon. Friend the Member for East Yorkshire (Sir Greg Knight) mentioned, as we move increasingly towards the digitisation of services, we find that there are additional costs of ensuring fair access for rural residents who do not have superfast, let alone ultrafast, broadband on which they can rely.
The Government have made a welcome pledge to conduct a new needs assessment preceding the new retention of business rates regime that they are introducing. That is great to hear, but colleagues would be wise to temper their optimism about any changes that might arise. After all, in 2012, the Government carried out a needs assessment and a consultation process. Those involved in the campaign were delighted—hurrah—when proposals were made that recognised the additional costs of delivering services in a sparse area, yet the additional funding that the Government had agreed was necessary was, for the most part, “damped” away. Under the mechanism designed to minimise volatility in funding in local areas, 75% of the gains that the Government had said rural areas should receive were not delivered. This was not damping as in delay, but damping as in totally and utterly removed. That is why our campaign has been calling for the residual amount, which we have calculated to be worth £130 million a year, to be paid in full to rural authorities.
My hon. Friend is doing a great job, if I may say so. Does he agree that the rural services delivery grant was a fine innovation by the Government, and does he share my fears that as we move towards 100% of local authority income being levied locally, provisions such as the rural services delivery grant might disappear—to the disadvantage of our rural constituents?
My hon. Friend is right to mention the rural services delivery grant, to which I shall return later in my speech.
The complexities of local government finance make it hard for us to get our heads around it. When we hear that there will be business rates retention, we might assume that we are somehow moving into a whole new world, in which taxes raised locally are kept locally, suggesting that we do not need to worry about the residual historical inequities that we are discussing today. But, no, that will not be the case. What is going to happen—it would be useful to hear from the Minister and have him put me right if I am getting it wrong—is that instead of the Government taking all business rates from councils and then giving out grants, they will look at where the business rates are retained and will effectively take the money away from anyone who is getting any more money than the current grant gives to others, while anyone who is getting less will be given more. Although we will have a “new system”, what we will get in effect is—unless the Minister tells us otherwise—precisely the same situation as we started with.
Whenever a Government bring in a new system, they try to minimise volatility, so business rates retention is likely to end up with everyone getting exactly the same money as they get today, which is why it is so important to push for a fair starting place. The danger is that business rates retention will bake in all the old inequities for ever more. There might be the dynamism of being able to retain the growth in business rates, but many of us fear that the ability of rural areas to grow their business rates base and thus make up for any historical inequities is going to be rather less than that of the likes of Westminster to grow its business rates base. I share that with colleagues, and I would be delighted if colleagues have any insights and want to put me right about it.
Let me give a practical answer. My area includes Hinkley Point C nuclear power station, and wants to take a view five years into the future on business rates retention. At the moment, however, we cannot do that. We do not know what we are going to get. My hon. Friend is absolutely right about the damping down, because we are not capable at the moment of doing the forward projections in the Sedgemoor area. Does he agree?
I do. As the system comes in, there will be equalisation, and because of the different dynamics at work and despite the righteous principle—on this side of the House—in believing people should be incentivised to do the right thing and then keep the money, there will almost inevitably be a revisiting. If it turns out that someone’s huge shopping centre is going to be closed, the idea of them being left with no money is preposterous; similarly, if a huge bounty comes someone’s way, it is pretty likely that the Government will do what Governments have always done and raid it.
From the perspective of Buckinghamshire, it is no exaggeration to say that this year’s local government settlement is far worse than the worst case and the worst scenario that the county council had calculated. On my hon. Friend’s specific point, beyond 2018-19, when Buckinghamshire loses the revenue support grant, the council has learned that it will effectively lose a significant portion of the business rate top-up grant. In 2018-19, it is set at £1.6 million and in 2019-20, it is £10.95 million. Is this not, in effect, a tax on success?
My right hon. Friend makes a strong point.
Returning to my theme of why we should be at least cautiously optimistic about any review promise in future, the Government responded to our campaign in 2014 and promised to conduct research into the additional costs of delivering services in rural areas. They say that they cannot move to recognise it until the evidence is there, and we have long said, “Show me a single service that is cheaper to deliver per head in a sparse rural area than in a concentrated urban one, and we will be delighted to hear it.” I have not heard anything yet. Apparently the current inequities are defensible without any evidence, but any change, even on the most common-sense basis, requires vast amounts of it.
Anyway, the Government conducted the promised research.in 2014. They gathered data from councils at short notice, during the month of August. Strangely, there was a shortage of data, and—unsurprisingly—no real conclusions were reached and no appreciable change was delivered. We were told, “We are sorry, but there is nothing to justify any change.” I therefore caution colleagues not to expect jam tomorrow.
Does my hon. Friend agree that the Government deserve real credit for announcing that they will adopt a national funding formula for schools to ensure that their funding will be delivered on an equitable basis in future, although the formula will be phased in? Should we not simply ask for the same arrangement in relation to wider funding? I am not suggesting any kind of gerrymandering of the system. I am merely suggesting the introduction of simple fairness that would recognise equality of need.
On this side of the House, but, I am pleased to say, in all parts of the House. They are here because they want a system that is fair to all. Conservative Members represent rural areas, but we also represent suburban and urban areas. We do not want a system that is reverse-gerrymandered, an unfair mirror image of the previous system. We want a system that is demonstrably and objectively fair to all, as far as such a system can reasonably be delivered.
Does my hon. Friend agree that the absence of representation on the other side of the House shows that this aspect of funding does not seem to affect different parts of the country in different ways? Labour Members representing urban areas do not feel the same concern, because their constituents do not have the same worries.
Historically, most of the Labour party’s support has come from the urban heartlands. That may have led it, when in government, always to use concentrated deprivation as an excuse for moving funds to those urban heartlands, at the expense of rural areas. As I said at the outset, it is important to bear in mind that people in rural areas are not part of an idyll. They are not richer; indeed, on average they are poorer.
I congratulate my hon. Friend on securing the debate, and on the splendid campaign he has fought on behalf of our rural communities.
May I take up the point made by my hon. Friend the Member for South East Cornwall (Mrs Murray)? Some of us were here throughout the long, long twilight years during which the Labour Government brutally transferred money from rural areas to urban areas. As a result of that, Shropshire will receive £325.67 this year, whereas Westminster, where we are sitting tonight, will receive £715.88. However, the settlement would reduce Westminster’s funding by 13.9% and Shropshire’s by a significant 24%.
As my hon. Friend says, delivering services in rural areas is expensive. Under the last Government we made some improvements, and we should be grateful for that, but the settlement is still extraordinarily unfair. We are exposed as a party. We are now the party of rural England, and we have to put this right. We do not want to ask for a single penny more from the Treasury; we just want a fair settlement within the envelope.
I agree with everything that my right hon. Friend has said, except one thing. We are not just the party of rural England. We are the party of the whole United Kingdom, and what we want, what we have pressed for, and what this campaign has always sought on a cross-party basis, is a system that is fair to all.
I do not represent some rural idyll. I represent two large and growing towns, Banbury and Bicester. I feel particularly strongly about the fact that because of the shortfall in local government funding my council is having to make some very difficult funding decisions that will affect areas of real deprivation. They will affect, for instance, children’s centres and health and wellbeing centres. Does my hon. Friend agree that that is a worry?
Absolutely. It is a worry. The distribution of funds becomes more important, not less, during a period of flat or reduced expenditure. It is a bit like when the sea goes out and all the undulations—the inequities—are suddenly exposed. That is what happens during a period of sustained control over public finances, which Conservative Members recognise as being inevitable following the economic wreckage that was left behind by the Labour party.
I thank my hon. Friend for his magnificent campaign. Does he agree that we must dispel the myth that there is no deprivation in rural areas, and make it clear that people in those areas are doubly disadvantaged by the lack of access to services such as transport?
My hon. Friend is absolutely right. Withernsea, a town in my constituency, is among the 10% most deprived areas in the country, and I know that similar stories can be told about colleagues’ constituencies throughout England. It is not true that there is no deprivation in rural areas. On average, it is not true. On average, the urban resident receives more. Urban areas do not consist of the most deprived, concentrated communities. They contain some communities of that kind, but on average people in urban areas earn a great deal more than those in rural areas.
North Hertfordshire District Council is an excellent council which has been making efficiencies for years. Does my hon. Friend agree that expecting it to accept a 57% cut in grant year on year is a very big ask indeed?
It is, and where will the pressure fall? It will fall either on services, as it already does, or on the only thing that the council has left, which is council tax.
One of the aspects of this settlement—perhaps the most notable aspect—is the turnaround in the approach to council tax. The rural resident, who is already much more highly taxed, will experience compounded council tax increases. If council tax goes up by 4% in April 2016, and then by 4% a year in 2017, 2018, 2019 and 2020, that will mean five years of compounded 4% increases before the 2020 general election. I suggest to Ministers that they may wish to think long and carefully before presenting that result to the electorate in 2020, while suggesting to rural England that it should support us again.
It is not necessarily the election in 2020 that we need to worry about, but the county elections in 2017. During the last Parliament, we managed to perform the really good trick of reducing waste in local government while often holding council tax at zero. However, it is not possible to go on making 30% cuts, which is what Gloucestershire will experience this year, and expect to do the same thing. Inevitably, council tax will rise.
As I have said, under this year’s provisional settlement, rural councils are being allowed to increase council tax by up to 4%. In order to compensate for the deeper cuts in their central Government grant, many rural councils will be forced to increase council tax by the full amount so that they can provide their statutory services. The impact of that will be that older, poorer residents in rural areas will be faced with an even larger council tax bill, and, more perversely, the gap in the amount of council tax that they and their urban counterparts pay will increase in cash terms.
I am also concerned about the mechanism whereby savings are being made in this year’s provisional settlement. At the end of the last Parliament, flat-rate cuts were applied across the central Government grant that every council received. If the Government were saving 11%, every council’s grant was cut by that amount. We argued strongly that that was not fair, because we needed to close the gap rather than allowing it to stay the same. This year, however, the Government are proposing to apply their broadly flat-rate cuts to the core spending power of local authorities. That sounds very reasonable and, indeed, natural, but it includes Government grant and council tax. As a result, the authorities that are already most reliant on council tax will experience a steeper cut in their Government grant, whereas those that are more reliant on Government grant will experience a smaller cut. Research by the Rural Services Network shows that, while metropolitan authorities will face a cut in Government grant of around 19% during this Parliament, rural authorities will face an average cut of 30% or more.
My hon. Friend is making an excellent case. May I enter a plea for semi-rural constituencies? Adur, which comprises most of my constituency, is a local government district. In half the areas within the national park we cannot have the development that would attract the new homes bonus, and the population is concentrated on the coastal strip where there are significant areas of deprivation. We are losing revenue support grant at a much higher rate, and it cannot be replaced by the new homes bonus because no land is available for development except on floodplains.
My hon. Friend is right. I remember speaking recently to a North Yorkshire councillor who said, “Given that we have a huge park here, we are specifically barred from development and we are rather restricted in our ability to respond to the incentives that have so generously been put in front of us.”
Just as we know all people are created equal and we hold them to be equal under the law, so surely we must insist on equity in the way we impose tax on them and fund the services that support their lives. Beyond imprisonment, taxation represents the supreme expression of the power of the state over the private individual citizen. As Members of this place, we would not accept it if the Government proposed to tax people more and to spend less on them because they were black or white, Christian or Muslim, a man or a woman. There would be uproar. Yet at present we presume to discriminate in this way based on the flimsiest of pretexts—the area in which someone chooses to live, to work and to raise their children.
The rural voice in British politics in some ways resembles our countryside itself. With a few glorious exceptions, ours is not a land of soaring mountains, plunging valleys and jagged peaks. To conjure up rural England is to convey the patchwork beauty of tended fields, the muted chime of church bells or the majesty of ancient woodland, reflecting man’s presence on the land as it has come down to us through innumerable generations. There is a softness and a neatness to our countryside that can be mistaken for cosseted privilege, all ruddy-cheeked squires and roaring fires. Those of us fortunate enough to represent rural areas know that that is not the case and that sleepy villages can be home to people whose lives are characterised by want every bit as intense, or blighted by strokes of ill fortune or ill health just as devastating, as those who dwell in our towns and cities. Yet this local government settlement would tell them once again, as it has done year after year after year, that they must pay more and make do with less.
The rural cause can—must, will—be silent no longer. It is for us in this place to give it a voice. For hon. Friends on my side of the House, I believe that to be especially true. It was rural England that kept the flame of Conservatism alive for a long period—nearly 20 years. Now is the time for those of us who have been loyally returned by rural areas to make good on our contract with our electors. I stand with colleagues to ask, politely but firmly, for fairness, not favours, from Ministers, and to express our unyielding resolution that that should be delivered.
The issue of local government finance, particularly in rural areas, is close to my heart, having served for eight years as a councillor prior to my election to the House. Having been leader of the opposition and then council leader on the Highland Council, an authority roughly the same size as Belgium, I have seen my share of financial challenges on both sides of the local debate, and I have great sympathy with right hon. and hon. Members discussing cuts to the budgets of English local authorities.
I would like to take a moment to pay tribute to the men and women who work across our councils. They deliver far more than many people appreciate, often in difficult circumstances, sometimes in distressing situations. Their help is there from before birth, throughout childhood and is weaved into our daily lives. It is even called upon when we die and in support of those left behind. In the light of the recent floods, special mention should go to those council employees across Scotland and the other nations of the UK who went above and beyond the call of duty to assist those in need. The scale of the flooding was exceptional, and the response in Scotland was truly first class.
Local councils, emergency services and other responders worked tirelessly to minimise the impact on communities, to ensure the safety of people and to help local areas to recover. To help them, the Scottish Government had already announced nearly £4 million for the local authority areas most affected by severe flooding caused by Storm Desmond in early December. This week, the First Minister has also announced that in the light of recent events the Scottish Government intend to make a further financial allocation of £12 million, meaning £1,500 per household and an additional £3,000 for businesses severely affected.
Since 2008, the Scottish Government have provided funding of £42 million per year to enable local authorities to invest in flood protection schemes. In my constituency, the Inverness flood relief scheme was successfully completed last year and has not only provided vital protection for Inverness, but regenerated the city’s riverside.
The Scottish Government provide funding to the Scottish Flood Forum to work with local authorities, communities, householders and businesses to help them recover from a flood event. A scheme in Whitesands in Dumfries is now included in the published flood risk management strategy for the Solway, and funding will be available to the council via the local government settlement to begin work on a scheme when ready. Funding for the flood forecasting service run by the Scottish Environment Protection Agency has been protected by the draft budget settlement. That is provided directly by the Government and is in addition to the grant in aid that is provided to SEPA. Today, the Scottish Government flood risk action plan was announced, with 10,000 properties being supported by investment of £235 million.
The Scottish Government also activated the discretionary Bellwin scheme in November and December. That exists to give special financial assistance to local authorities as a result of their providing relief and carrying out immediate work due to large-scale emergencies, including flooding incidents. The Scottish Government have also recently legislated to give councils the power to reduce and remit rates bills, which councils could use to target support to the businesses in their areas affected by the floods.
The Scottish Government are investing in rural communities, are seeking to provide better transport infrastructure, and better access to medical care and hospitals, and are mitigating the cuts made by the UK Government with a new rural fuel poverty taskforce.
The hon. Gentleman mentions fuel poverty. This is interesting. If there is one gleam of light for my constituents at the moment, it is the fact, as I have found recently, that if people fill up their oil tank—many rural constituencies use heating oil—the price is less than half what it was not so long ago. However, the fall in the oil price will have had significant implications for Scottish funding. I wonder whether he would care to reflect on that. He talks about UK cuts. What sort of cuts would have had to follow in the event of independence with the current forecast for the oil price and oil revenues in Scotland?
This is a common red herring that is introduced into the debate on Scottish funding. Scottish GDP is roughly the same as English GDP, and oil is a bonus for Scotland. When the price goes back up, obviously, the Treasury will continue to benefit from that bonus.
One of the first things that the Scottish Government did in 2007 was to decentralise local government funding by removing ring-fencing. Today, I am delighted to confirm that the Scottish Government Community Empowerment Minister has announced a £500,000 fund for a pilot scheme for people to take part in participatory budgeting in rural areas, giving people a direct say in how investment should be taken forward in their communities.
Health and social services in Scotland are to be delivered in partnership between health boards and local authorities. The Scottish Government are also taking action to support rural hospitals in recruiting and retaining their medical staff, ensuring that patients receive safe care. In some areas that will involve rotating staff between rural and urban hospitals to ensure that we continue to provide services close to communities. That work has already delivered early success in supporting general surgical services in Belford hospital. Working with NHS Highland, the Scottish Government are now putting in place a network between Caithness general hospital and Raigmore hospital in Inverness, rotating staff between the two hospitals. This will support the delivery of the majority of surgical care and all out-patient care close to the community in Wick, while NHS Highland engages with local stakeholders to develop options for high-quality, safe and sustainable services throughout Caithness.
The hon. Gentleman has mentioned medical recruitment and retention in Scotland. I do not wish to reflect on the challenges that we have in England, but there are challenges in Scotland in psychiatry and general practice recruitment that are probably worse than those in England. Will he please reflect on whether the increased funding settlement in Scotland compared with that in England is beginning to bear fruit, or whether the challenge has actually worsened over the past two or three years under the current measures?
Funding for Scotland has been drastically reduced over the past few years. We recognise the fact that we need more medical professionals, and that is why a comprehensive support package for training is in place in Scotland.
The Scottish Government have also committed to working with local authorities to develop stronger and more productive relationships between central and local government in order to develop real benefits for the people of Scotland. The Scottish budget for 2016-17 for local government has taken place against a backdrop of the toughest public expenditure conditions we have faced. This is the austerity of choice not of necessity, and it has been rejected wholesale by the people of Scotland. Between 2015-16 and 2019-20, Scotland’s total budget will be reduced by 4.3% in real terms. Scotland’s total discretionary budget will be cut by £1.2 billion in real terms, or 4.2%, and funding for day-to-day public services —the fiscal resource—will be cut by almost 6% in real terms, or £1.5 billion.
Between 2009-10 and 2014-15, Scotland’s budget has fallen by around 11% in real terms, with capital expenditure falling by around 34%. This means that our budget has been cut by a staggering £3.5 billion in real terms since 2009-10. As a result of the autumn statement, the Scottish Government’s revenue budget will be cut by 5.7% in real terms over the next four years. However, Scottish local government finance settlements have been maintained on a like-for-like basis for the period from 2012 to 2016, with extra money for new responsibilities. This has resulted in a total settlement of £10.8 billion in 2014-15 and more in 2015-16, allowing rural local authorities and others to perform their duties.
Additional funding has been made available for health and social care, local authority school budgets and support to ensure that the council tax freeze is maintained for its ninth consecutive year. I have to say I agree that once we let the genie out of the bottle and increase council tax year on year, that is exactly what will continue to happen: it will increase year on year. The sum of £70 million is included in the settlement to continue the council tax freeze for a ninth consecutive year, which in turn continues to fully fund local authorities for the moneys that would have been collected by raising the council tax.
While I am on the subject of the freeze on council tax, it should be remembered that before the Scottish National party came to power and agreed the freeze with the councils, this most regressive of taxes had been going up every single year. That was hitting the poorest households and pensioners the hardest. During the 2007 election campaign, I knocked on the door of a constituent in Fort Augustus who was in tears at the thought of yet another pressure on her household purse because of the threat of an increase in council tax.
This measure has now saved the average family some £1,500 at a time when they find themselves most under pressure. Those advocating a return to increasing council tax should remember that that would be likely to result in a return to the yearly default of ever-higher council taxes, with services remaining under pressure due to the UK Government’s austerity obsession. This tax is applied not only to those who can afford a little bit more but to those who cannot withstand yet another squeeze on their ability to put food on the table or to heat their homes.
The net revenue reduction for local authorities next year will be £320 million. That amounts to a reduction of 2% of the total expenditure of local authorities. It is a challenging settlement. However, that does not take account of the additional allocation announced by the Deputy First Minister of £250 million for social care.
The hon. Gentleman mentions a reduction in local government revenue support grant of just 2%. I do not know whether he was in the Chamber when I intervened on my hon. Friend the Member for Beverley and Holderness (Graham Stuart) in his excellent speech to tell him that my local authority of Gloucestershire was likely to face a reduction of 30% this year. Does that not wholly demonstrate what a generous settlement Scotland has had?
It wholly demonstrates the fact that the Scottish Government prioritise local authorities to ensure that they have the ability to deliver the services that they need. I have listened carefully to the complaints being made in the Chamber, and I absolutely agree that some of the cuts being faced by English local authorities are devastating. That is why I am proud that the Scottish Government are prioritising these measures.
The net revenue reduction will be £320 million, but that does not take account of the additional allocation of £250 million for social care. Previously, it has been the sole responsibility of local authorities to fund social care. The national health service will now share that responsibility and will next year invest another £250 million in those services.
The funding settlement also needs to be seen in the context of further funding for local authority school budgets. The budget sets aside funds to ensure that we are progressing the work to close the attainment gap. The £33 million that will be invested next year is part of a bigger programme of £100 million that is being invested over and above local authority school budgets to prioritise improvement in attainment.
Let us compare the situation of Scottish local government with that of English local government. The funding for English local government has gone down by 27% over the past two years while Scottish local government has essentially had a flat cash settlement from the Scottish Government for a number of years. So we are starting from a much higher baseline figure for the provision of local authority services. This underlines the SNP’s commitment to supporting local government.
If the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) will forgive me, I will not follow him up the highways, byways and glens of Scotland. I find local government finance complicated enough without adding in a Scottish element. As he has spoken in the debate about local government funding for rural areas, which of course include vast swathes of Scotland, I hope that he will let us know during the course of the evening whether his party will vote in February when we come to discuss the final settlement for these proposals, which may or may not have a direct effect on Scotland. Given the way in which the Scottish nationalists’ rhetoric has been going since the May general election, they will no doubt claim that it has an indirect effect on the matter. I am sure that the Government will listen with great interest to whether Scottish National party Members of Parliament will be here on that night in February. That might have some bearing on the Government’s thinking.
In the 24 or so years that I have been in this House, I have deliberately never spoken about local government finance because it is an impenetrable subject. I am grateful to my hon. Friend the Member for Beverley and Holderness (Graham Stuart) for having spoken so cogently and clearly on the subject today and for leading our campaign to persuade the Government to treat rural areas more fairly when it comes to local government finance.
Does my right hon. and learned Friend share my view that, in the extremely eloquent speech made by my hon. Friend the Member for Beverley and Holderness (Graham Stuart), he omitted to mention “The Picturesque”, which of course comes originally from Herefordshire, as described by Gilpin? Does he also agree that our hon. Friend was the most picturesque adornment present on these Benches as he gave us his presentation? Does my right hon. and learned Friend share my view that the counterpart to the extraordinarily poor settlement that rural areas have received might involve not only an improvement in that settlement on the current basis but also additional capital funding to allow rural areas to develop an economic strength from which future revenue could derive?
A number of points flow from my hon. Friend’s intervention. First, he confirms why it was sensible of me never to have spoken about local government finance. Secondly, I agree with him that Herefordshire is a beautiful county, and he illustrates that, but many of us who represent shire counties do not just represent rural areas. For example, my constituency is 90% rural geographically, but 50% of my electorate come from a suburb of Leicester—Oadby and Wigston, a borough in need of special attention from the Government. I have discussed that with the Minister and I will bring the matter back before the House before very long.
My hon. Friend the Member for North West Leicestershire (Andrew Bridgen) and my right hon. Friend the Member for Rutland and Melton (Sir Alan Duncan) are in their places tonight. Because we represent that bit of Leicestershire outside the city of Leicester—there are seven Conservative Members of Parliament for the county of Leicestershire and three Labour Members for the city itself—it is assumed that we all represent, and all our constituents live in, wonderful leafy idylls. I refer to the pre-penultimate paragraph of the speech made by my hon. Friend the Member for Beverley and Holderness there. There are, however, people living in my constituency, for example, in South Wigston, Market Harborough, Fleckney and Kibworth, who are not at all well off. Market Harborough is a market town, as its name suggests, but Kibworth and Fleckney are large villages. As my right hon. Friend the Member for Rutland and Melton would agree, there are people living on farms and in little hamlets who are not at all well off. The fact that we represent so-called “shire counties” does not mean to say that everyone there drives around in a Range Rover and is looking forward to the next cheque from the common agricultural policy—life is not like that.
As has been mentioned, school funding in our area is second bottom of the Whitehall funding list, although it costs just as much to educate a child in rural or semi-rural Leicestershire as it does in the city of Leicester. Indeed, many schools in the borough of Oadby and Wigston, which abuts for three or four miles the city of Leicester, are educating city children, who come across the boundary into the county of Leicestershire because, by and large, the schools in my constituency, and no doubt in the equivalent parts of the county around the border of the city of Leicester, are, on average, better than those in the city. Yet we have to pay for the education of those children from the city of Leicester with the much-reduced county funding. That is just an illustration of the problem we face year on year.
In a rural area such as mine, where my local district of East Lindsey covers 700 square miles, most of which forms my constituency, there is an added problem with transport. It costs Lincolnshire County Council millions of pounds to transport children across the county to their nearest school, a cost that, happily, most city centre children do not have to bear.
I agree on that, and my hon. Friend illustrates the sparsity factor. I am getting into the jargon now—you might almost think I am beginning to enjoy myself, Madam Deputy Speaker, but I do not want you to get that impression. On the sparsity factor, getting schoolchildren from parts of rural Lincolnshire or rural Leicestershire to the town centres where the schools are is an expensive activity and the county councils are finding it increasingly difficult to subsidise it, to the concern of the parents of those children.
I do not wish to think of this as being as complicated or difficult as the Schleswig-Holstein question, but I sometimes think that either I am either dead or mad, or I have forgotten the answer. Lord Palmerston, one of our greatest Prime Ministers, said that only three people knew the answer to the Schleswig-Holstein problem—one was dead, one was mad and one had forgotten the answer. That is a diversion, I hope.
I am relying heavily here on a note provided by the excellent Conservative leader of Leicestershire County Council. The council recognises that the Government wish to use “spending power” as the only means of discussing the funding available to local authorities and that there are financial constraints—there is a limit on the amount of public money available. In government jargon, “spending power” means Government-funded spending power—I know this gets very exciting, Madam Deputy Speaker—which means core spending power minus council tax. It consists of the settlement funding assessment, the new homes bonus and the rural services delivery grant, and from 2017-18 it will also include the improved better care fund—would that Lord Palmerston were with us now!
The Government’s proposed changes to the revenue support grant, designed to limit reductions in funding for the local authorities most dependent on RSG, such as inner-London boroughs and cities, will have a significant impact on Leicestershire and other similar counties. They will mean a £6 million additional loss of RSG, making a total reduction for the county council of £19 million in RSG for 2016-17. The additional loss to all counties amounts to £160 million. The Government’s proposals also will mean that £2 million of retained business rates will be lost to Leicestershire in 2019-20 as those are redistributed—guess where, oh Conservative Government—to cities and inner-London boroughs. I am not making this up. These changes can fairly be seen as the latest in a series of “compromises”—I say that politely—made by successive Governments.
Let me quickly illustrate how the system is not working now. The RSG does not take account of the needs of the local population. RSG per head in 2016-17 in Leicestershire, which includes the seven or eight district councils or borough councils outside the city of Leicestershire, is £67, whereas the figure for Islington is £246 and the figure for the city of Westminster is £251. Council tax per head at band D in 2015-16 for Leicestershire, including the districts, was £490, whereas the figure for Islington was £416, with the city of Westminster figure at £352. One sees straightaway from those examples the imbalance that the campaign led by my hon. Friend the Member for Beverley and Holderness has been so successfully highlighting.
Spending power—I referred to that complicated compendium a moment ago—is apparently how the Government define income to a local authority. The Government headlines around the provisional settlement and the so-called “good news” are directed towards the position right at the end of this Parliament, in 2019-20, and not to the current year. My colleagues in the county council welcome the principle of a four-year settlement, but not if its certainty increases the savings required and compels further service reductions in the short term, and does not take account of spending pressures at the end of the four years, when a projected 3.5% increase in spending power for Leicestershire will be totally inadequate. That sort of increase would simply not meet the needs of the over-65s, an increasing school-age population and the cost of the living wage. For example, the cash increase in spending power for Leicestershire County Council by 2019-20 equates to £12 million, but that is the context of living wage costs to the council by 2019-20 of £20 million. The 2% adult social care precept equates to £22 million, which compares with the increase in adult social care costs, including the living wage, of £50 million over the same period.
My right hon. and learned Friend is making some very good points, particularly on adult social care. We are finding that, increasingly, people choose to retire to rural areas, where life expectancy is higher. Adult social care is the part of the upper tier local authority budget that is increasingly suffering from great strain. Does he agree that, when we are looking at local authority budgets and at the demographic needs of rural areas, the increasing pressure on adult social care budgets and the increasing number of people requiring adult social care in rural areas because of that demographic shift to an older population is something that needs to be put into those budgets today? We also need to future-proof those budgets and the projected increases in Government spending in the years ahead.
I am sure that that illustration applies both to my county of Leicestershire and to my hon. Friend’s county of Suffolk. As a doctor, he will have seen how that matter touches on his constituents directly. Certainly in Leicestershire, 50% of the £350 million revenue budget is spent on adult social care. If my hon. Friend is right, that percentage can only go up as we move through this Parliament and beyond it, so the points that he makes have even greater purchase than perhaps he might have initially thought. It seems, too, that the scope for savings is necessarily restricted. As a result of the provisional settlement, Leicestershire needs to save £28 million in 2016-17, increasing to a total of £83 million by 2019-20 just to ensure that it is living within its means. That is on top of savings that the county has already achieved of £130 million.
I do not pretend to have an instant solution to any of this; I do not suppose that any one of us does, but I urge the Government to think a little more intelligently about how it deals with local government finance and how it distributes what is accepted to be a limited pot of money across the country. Without wishing to be rude to the hon. Member for Inverness, Nairn, Badenoch and Strathspey, I urge Members to forget about Scotland for the moment—it is a difficult thing to do, but we will do it just for this evening—and to call on the Government to work out what is fair. A poor person in Harborough is no better off than a poor person in inner-city Leicester. A poor elderly person in Harborough needs as much financial support as a poor elderly person in the city of Leicester. I appreciate that there will be rough edges and that there is no perfect solution to the problem, but I am reasonably sure that there is a better solution than the provisional settlement that we are looking at now.
Leicestershire is a well-behaved Conservative council—I do not mean that in a pompous way, although I have been accused of many things and pomposity may be one of them. It believes in using taxpayers’ money well and in getting good value for every public penny spent. We are not about to initiate some sort of riot or revolution in Leicestershire County Council. We are just asking for a bit of fairness—not a difficult thing to ask for. Although I do appreciate that that is hard to deliver, I none the less think that the Government should try just a little bit harder.
I thank the hon. Member for Beverley and Holderness (Graham Stuart) for securing this debate. I was absolutely delighted when he asked me to co-sponsor it, because this matter is so important for many, many rural communities, including my own in Cumbria.
This debate is about fairness. It is about local authorities in rural areas receiving fair funding. Wherever we live, we pay a fair amount of council tax, from which we as a resident or a business in that community expect to receive decent, accessible services. Currently, rural communities tend to pay higher council tax bills, receive fewer Government grants and have access to fewer services than communities in urban areas. One thing I have always thought is that those of us who have been brought up in rural communities have lower expectations about what services we are entitled to, and we should not have; we should demand what we pay for.
Cumbria, where I live, is a truly rural area. Aside from the small cathedral city of Carlisle, it is the market towns that grow our economy. Some 95% of our businesses are small and medium-sized enterprises, most of which employ fewer than 20 people. Other rural economies are hinterlands to city regions and they have very different expectations, problems and challenges to the ones that we face in Cumbria.
Cumbria has one of the largest land mass areas in the country. To illustrate my point, I ask Members here to imagine a map of London and its surrounding areas. If we laid Cumbria over that map, it would cover an area from Cambridge in the north, all the way down to Hampshire in the south, across to Oxfordshire in the west and over to Essex in the east. I do not think that many people really appreciate the size of the county. Given that alongside that we have a population of only 500,000, delivering services for our local authorities is a real challenge.
The real difficulty for Cumbria is that the business rates retention model is based on growth in business premises. I have already mentioned the number of SMEs and the small number of people they employ, and because of that many of them are based at home; they are residential businesses. Many, for example, are bed and breakfasts. We have only a limited amount of business growth that will be reflected in an increase in business rates income. To put it simply, we cannot increase our income from business rates in the way that can be done in urban areas; we simply do not have the capacity. As I am sure many Members will agree, it is also more problematic for those areas that have two-tier authorities, such as Cumbria.
Let me focus on some of the challenges. First, there is transport, which has already been discussed today. In Cumbria, we have 7,000 miles of roads, and that does not include all the footpaths that the local authority has to maintain. The geography and our weather conditions mean that a huge amount of resources are required to maintain those networks. The large number of visitors we receive also puts a lot of pressure both on the roads and the footpaths. In fact, under the current funding formula, Cumbria does not get any extra money for dealing with its visitors, who increase the population hugely during the summer.
We also need to think about the weather. Everyone has seen the recent flooding in Cumbria. Our roads always suffer very, very badly from the weather, which again puts increased pressure on the council’s funding. We now have huge problems to resolve. I know that we get extra funding from Government for the flooding, but it does not come close to what we need, particularly given the recent council cuts. Our transport budget has been cut by a third, so the roads are already in dire need of extra help.
I thank the hon. Lady for that intervention. I am grateful that I have two of my hon. Friends in front of me, but I take her point. To me, rural issues should not be party political issues. Everyone who lives in a rural community is entitled to be represented by both parties, by the Scottish National party and by other parties that are not represented here today. I have discussed these issues with other Members. I know they are interested and I would have liked to see more of them in the Chamber this evening. I cannot deny that.
On another transport-related issue, let us look at the impact that lack of funding has had on our bus services. Owing to the reduction in funding for Cumbria county council, we have unfortunately lost a number of bus services as the county could no longer afford to pay the subsidies. In a rural area that is a real worry. In Cumbria, anyone who cannot afford to buy and run a car, or who cannot drive, is cut off from accessing services or even from being able to get a job and go to work. In the village where I live, we have a bus to Cockermouth on a Wednesday, which is fine for people who want to do a bit of shopping or meet some friends, but is not much good for anyone who needs to get to work. That service is now under threat. We could lose that important lifeline for the elderly people who live in my village.
My daughter was unable to get a job until she passed her driving test. It is not cheap for a young person to pass a driving test and it is not easy to do so—it took her three goes, but she passed and she now has some work. That situation puts extra pressures on our young people and does not encourage them to stay and live in our communities.
These huge costs of transport make it difficult for the local authority to deliver services across the board. Those transport costs are a factor in the delivery, for example, of social care, as has been discussed. Another example is waste collection. Studies have shown that it costs almost double the amount to collect a bin in a rural area, compared with an urban area. It is not just a little bit more expensive; it is much more expensive.
The public health funding model does not take into account the significant cost of running services in rural areas—again, because of the transport costs and the distances that need to be covered—so we risk letting down the people who live furthest from the centre. The people on the edges are often missed because of the difficulty in delivering those services. That is exacerbated by the fact that our population is ageing. If our population is ageing, does not want to drive and is experiencing more health problems, it seems crazy to me that we do not have sufficient funding to allow older people proper access to the health services that they need.
We have had a campaign running in Cumbria for some time to ensure that services from West Cumberland hospital are not moved to Carlisle and beyond that to Newcastle. It is still a long way for people in my constituency to go to Whitehaven to access services there. If we lose that, it becomes more problematic. Recent events in Cumbria and the number of road closures and bridges damaged show the paucity of our roads infrastructure and the further problems that that causes. We need proper funding so that the county council-maintained roads can be properly managed; otherwise, there is the risk of dreadful isolation in communities in rural areas.
Hon. Members have spoken about rural poverty. Pockets of rural poverty are very real, but often missed. If we do not have proper outreach services, we do not know what people need. As I said, people in rural areas tend to be quieter about their requirements. We could go down a dangerous route if we are not careful. We need to make sure that everyone has the services they need and that they can access employment properly. Unless we do that, we simply pile on the deprivation and do nothing to support those who need help most.
I shall move on to another issue, which I wish I did not have to do. The Government have suggested on a number of occasions that local authorities can make cost savings by prioritising internet-based services and advice. I do not know what it is like for other hon. Members, but I do not want to get bogged down in the lack of access to broadband in my constituency. It makes me want to tear my hair out.
The hon. Lady makes an important point. Broadband access, as we know, is not as easily available in rural areas as it is in urban areas. Also, given the demographic issues that have been discussed during the debate, we know that there is a challenge with the very elderly, despite the best efforts of local charities and outreach groups in many of our constituencies to get them to engage with digital technology. That is not to say that all older people do not engage, because some do, but with the very elderly there is a particular challenge, and those people can be the among the most vulnerable in our communities.
I thank the hon. Gentleman for that important point.
One of the problems with broadband is that too many assumptions are made about what we can achieve in rural areas. What I find most frustrating is that as the superfast broadband connection is rolled out in some areas, where we are not getting superfast we are getting super-super-slow as the speed goes down and down. By making it better for some people, we are creating a huge problem for others. I urge the Government not to tell hon. Members and their constituents that they should be accessing internet-based services, when it is incredibly difficult and frustrating to do so. We should either fund broadband properly or accept that we need to look at different solutions.
The hon. Lady may be a sole voice, but she is making a powerful and important speech, particularly given that it is from the Opposition Benches and grounded as it is in her constituency experience. Does she agree that the inability of rural councils to deliver services more cheaply and more conveniently digitally because the infrastructure is not there, as she has just described, is another reason why a further increase in the gap between urban and rural is untenable?
The hon. Lady is indeed making some fine points and I agree with many of them. Does she agree, though, that the issue is not just rural broadband and accessing those services? She made the point about rural businesses. In many rural areas, they cannot even get a mobile phone signal. That further hampers rural communities’ ability to do business and look after themselves.
That is correct. I do not get a mobile signal at home, so I understand that point. Another point that has been made to me by a number of rural businesses recently is the inability of people who have gone to markets to sell, for example, to use the hand-held card things because they do not have the signal to be able to operate them. I do not know the technical term, but that causes them problems when they try to sell.
In conclusion, I would like to ask the Government to look again, as other hon. Members have requested, at the way the funding is allocated. Robust rural proofing must be applied to all funding formula decisions right across Government to ensure that we have equality of treatment and sustainability of services.
The hon. Lady is making a passionate speech. Does she agree that it cannot be right that our elderly, vulnerable rural residents, who have paid their taxes like everyone else all their life, may be faced at the end of their life with moving to an urban area so that they can access the normal services that they should expect in rural areas?
I thank the hon. Gentleman for that intervention. It comes back to the lack of bus services, for example. A number of elderly people in my village use the bus on a Wednesday because it facilitates a social life; they can go into town and meet their friends. If that bus service goes, where will that leave them? About a year ago one elderly resident fell and broke her shoulder. All she wanted was to get well enough to be able to get back on the bus and go into town. Had she not had that incentive, I worry that she might not have recovered so quickly. These services provide so much more than is indicated by their face value.
In a nutshell, I would like the Government to think about the bigger picture and consider how important access to transport services, and indeed to all services, is for rural communities. Without proper funding for local authorities, those services will deteriorate. We do not want anyone in our communities to be disadvantaged, so I urge the Minister and the Government to reconsider.
It is a great pleasure to follow the hon. Member for Workington (Sue Hayman), who said not a word with which I could possibly disagree, and who underscored in not only what she said, but how she said it, the point my hon. Friend the Member for Beverley and Holderness (Graham Stuart)—I thank him, on behalf of everyone in the House, for securing the debate—made in his opening speech: this is not a debate about party politics or affiliation; it happens to be a debate about geography. It is a debate about something that we would all hope underpins everything that any Government do: to strive for equity and fairness.
As a new Member of the House, I rise more in sorrow than in anger. I am disappointed that I find myself incredulous about the proposals that has been outlined for my county of Dorset. I have a bit of form in this regard. About nine years ago the leader of West Oxfordshire District Council—I lived there at the time—called me up and asked me to join his executive committee. I said yes, but I thought to myself, “So long as it has nothing to do with finance.” He then asked me to take the resources portfolio, so for seven years I struggled with the budget. We were all very sensible about it, as I believe most local government—particularly, though not exclusively, Conservative local government—has been in helping the Government of the day respond to the pressing financial challenges and the huge black hole in our national finances. Therefore, those of us who rise with concern about this settlement do so not like an ostrich with its head in the sand—we are not ignorant of the pressures on the Treasury—but because we are keen to ensure equity and fairness for our constituents.
Will my hon. Friend allow me to demonstrate exactly what he has just said by giving the example of East Lindsey District Council? It is a Conservative council that has tried to look ahead and has planned and saved because it suspected that central Government would make funding decisions that would lead to a lower allocation. Those in the council have done their best, but with the latest funding settlement they are holding their heads in their hands and asking what more they can do.
My hon. Friend is absolutely right. She sets out a repeating pattern of change and evolution that we have seen in local government, and my hon. Friend the Member for The Cotswolds (Geoffrey Clifton-Brown) will know of the work that his council did with my old council. Let me give an example of what North Dorset District Council has done. It is a low-spending, low-taxing, Tory-controlled, rural shire district council. It has been on its efficiency journey for well over 10 years, during which time it has developed a mixed economy of services, transferring some services to community groups and town councils. For example, Blandford Forum Town Council chips in £50,000 for the running of the town’s leisure centre, which just a few short years ago was the sole preserve of North Dorset District Council. It has transferred other services to commercial operators. Its final asset—the last jewel in its crown—is the council office site, and it has already agreed to dispose of that as part of its survival campaign.
North Dorset District Council is part of the Dorset councils partnership, which is the only tri-council model in the country, covering the constituencies of my right hon. Friend the Member for West Dorset (Mr Letwin), my hon. Friend the Member for South Dorset (Richard Drax) and myself. We share a chief executive, a senior leadership team and staffing with two other local councils. When the district council started this journey we had 300 members of staff, and we now have 100. This is not about arguing for the status quo; it is about arguing for fairness.
No, and for reasons that I will explain to my hon. Friend in just a moment.
If I took Members to my North Dorset constituency—this echoes what my hon. Friend the Member for Beverley and Holderness, the hon. Member for Workington and others have said—they would see that it looks lovely, and it is lovely. But we have poor public transport, notwithstanding the excellent service that Damory tries to provide with the budget it receives from the county. The majority of my residents are retired. We have poor and patchy broadband. We have an historical low skills base. We have a poor road infrastructure. One of our straplines is, “Come to Dorset; there are no motorways.” Forget motorways; we have no dual carriageway in my constituency. Indeed, a passing place on a B road is greeted like an oasis in the desert. Access to affordable housing is constrained. The average salary of a vast number of my residents is well below the national average—the national average is about £24,000, but in my constituency it is about £17,500. A large number of my constituents are tenant farmers, or those associated with agriculture, living in tied accommodation.
Therefore, although those wonderful rolling hills and green pastures of the Blackmore vale look enchanting, and while the area of outstanding natural beauty of the Cranborne Chase is indeed beautiful, there are pockets of deprivation in those rural areas, for example in Blandford Forum, Shaftesbury and Gillingham, and for some unknown reason no wise expert in either the Treasury or the Department for Communities and Local Government can find a perfect mechanism for measuring that rural deprivation. That is a huge gap in how we approach the settlement.
My hon. Friend is speaking with his customary eloquence. I simply rise to add to his list of challenges. It is not just public services that challenge us; the inability to access banks and other amenities means that people in our communities have to travel that bit further to do their banking or grocery shopping, and that all adds to the cost, particularly when it comes to public transport.
My hon. Friend is absolutely right. He can add to that litany the fact that something as simple and mundane as a waste collection service costs far more in a rural area than it does in an urban area. It is far easier for a large rubbish truck to trundle up and down the terrace streets of Cardiff, Bristol, Manchester or Birmingham than to go up hill and down dale, and from one house here to two farms there, so it is more expensive. The costs of getting children to school on transport provided by the county council is higher. The cost of everything is higher. It costs more to heat homes, because they all predate cavity wall insulation, and because conservation area status and listed buildings simply preclude double glazing, solar panels and the like.
At every step, when we analyse it in the cold light of day, there is precious little reason to live in a rural area today. The difficulties are compounded when a Conservative Government who had had at the heart of their manifesto the firm commitment, on which I certainly stood, of rural-proofing these things, free from the fetters of the yellow peril of the Liberal Democrats—[Hon. Members: “Hear, hear!”] The House is free of it now, too. The Government are now suddenly appearing to shirk the task that Conservative Members wish them to undertake.
Let me deal with the three things that I find particularly irritating within the proposed settlement and pick up the point made by my hon. Friend the Member for South East Cornwall (Mrs Murray). If only Dorset County Council had four years to deliver the medium-term financial strategy that it had planned—the £13 million-worth of savings that it had identified—but Dorset, like Buckinghamshire, has been given two years, and then its revenue support grant disappears. That is why I am afraid I cannot welcome what my hon. Friend asked me to welcome. East Dorset District Council, in which part of my constituency falls, sees its RSG disappear after one year. With no prior warning, no consultation and no advice, its medium-term financial strategies are now shredded.
That is unfortunate, because the local government of Dorset was significantly reviewing what it did. Exciting proposals were coming forward and a vivid debate was going on about large unitary districts, a combined authority and so on, all with the expressed aim of helping my hon. Friend the Minister and my right hon. Friend the Chancellor achieve what we all want to see—economic efficiency, with services delivered at the best possible price for the council tax payer. All those potential proposals have had to be put on hold while a reduced officer corps desperately tries to focus on which service is more, or less, important and must not just have the fat trimmed off—we have gone through the surface of the bone and, in some instances, are sucking out the marrow.
My hon. Friend and neighbour mentioned east Dorset, part of which falls within my constituency, but he is making a very good case for Dorset as a whole. Does he agree that we are not calling for special favours for Dorset, but simply for fairness, and that the aim should be to reduce the inequality rather than increase it?
My hon. Friend is absolutely right. This is not special pleading. We are not saying, “Do this because these rural areas all, or broadly, vote Tory.” This is not some sort of banana republic in central Africa where the governing party’s Members of Parliament have more of the lion’s share because they are of the governing party. All we are asking for is equity and fairness—for the same rules to be applied across the piece.
My hon. Friend is making a very strong speech. Rural areas, particularly the rural counties, many of them Conservative controlled, have made these reductions to their budgets and run a very prudent house. In Devon, we are cutting back by £28 million. We have had a £2 million increase, and that is welcome, but when the budgets of inner-city and metropolitan authorities are being increased, it is time that we had a greater redistribution. As he says, we now have these seats in the south-west, and across the country, and we expect a really fair deal. Because of roads, transport and schools, we do need that extra money.
My hon. Friend is right. His comments have the extra weight of his being Chairman of the Environment, Food and Rural Affairs Committee.
The Minister should be clear that this settlement will create some jobs as local government sheds yet more staff and services are cut. I expect to see job advertisements for local government commissioners appearing in lots of publications, because a number of chief executives and leaders will be seeking, in effect, to hand the keys back to the Department, saying, “Look, pal, we have tried our best. We have done what we think we can. We can make no further cuts, hand on heart, without thinking that our electorate and our residents will be unduly hurt.”
As my hon. Friend said, many of our rural councils have done exactly what the Government have asked. In Gloucestershire, four district councils now share back-office services. We share a chief executive. We have a common Gloucestershire-wide rubbish policy. We share business rates and second home bonuses. We have become super-efficient, yet we are one of the hardest hit local authorities, and we now have very little left to cut.
My hon. Friend is right. He amplifies a golden thread that has run through the debate.
I have two further points that I urge the Government seriously to reconsider. The Care Act 2014 implementation grant has hitherto always been free-standing of the RSG—a little bit of icing on the cake. The proposed settlement rolls it into the RSG, and that seems rather unfair. I am happy to stand corrected by the Minister, but it is certainly the collective view across local government in my county that, in essence, the strategy that the Department is setting out has a counter-Conservative mindset whereby every single year council tax will have to increase by below whatever the capping figure is prevailing at the time, so arguably 1.99% today, and that the ring-fenced and extremely welcome—we are grateful to the Chancellor—2% hypothecation for social care will have to be year on year. I urge the Minister to unravel the knitting that the Department has done in meshing the grant with the RSG.
On the implied and presumed increase in council tax, the insult is compounded still more by the situation, as we understand it, on business rates. We cheered my right hon. Friend the Chancellor to the rafters in Manchester just a few short months ago when he gave ground on the localisation of business rates, which local government had been campaigning on for many a long year. I hope that the Minister will be able to clarify this, but our understanding is that while we will be allowed to set it and will continue to collect it, the centre will determine how much of it we retain and top-slice or cream off that which it believes we do not need in order to underpin and subsidise other, less efficient, authorities. That is, in itself, an insult, but when we add the factored-in, year-on-year increase in council tax of at least 3.99%, things start to get very tricky.
As my late and noble Friend Baroness Thatcher would have said to those three points, taking off her glasses with a sweep, I too have to say to the Minister, “No, no, no.” The increase of the rural services delivery grant to £65 million is welcome but way south of the £130 million that the network believes is required. It might just about make a fig leaf for a dormouse but will not add up to anywhere near what is required to service rural local government.
I have some questions for the Minister, for whom I have personal liking and huge respect. I do not envy him his position as he sits like Daniel in the lions’ den with the lions not having been fed for many a long month. The questions boil down to this: where is the equity in this proposal?
My hon. Friend is making an impassioned speech. The people of Leicestershire roared at the prospect of business rate retention, and the settlement for Leicestershire suggested full retention by 2020. The combined Government grant for local and county councils in Leicestershire is £136 million a year, and our current business rates are £226 million a year—a difference of some £90 million a year. I would be interested to hear from the Minister how soon we will be able retain those extra funds, especially given that North West Leicestershire has Coalville, which is the most deprived town in Leicestershire. North West Leicestershire is vibrant and has high economic growth. We have produced 23% of all the county’s business rates and we need those funds for the regeneration of Coalville. If that does not happen, we will be very disappointed indeed.
My hon. Friend makes a valid point and he can speak about Coalville with more detailed knowledge than I can. The underlying point is that there seems to be an incorrect assumption that Tory taxes in Tory shires will have to go up in order for Tory business rates in Tory areas to be relocated to other areas. That is a kick in the teeth and I fail to grasp the logic.
Why is the sparsity grant being back-loaded rather than front-loaded? The money is needed now. We are a two-tier county and the figures for Dorset County Council alone show that it loses 43.3%. The planned reduction was 30%, so it is not as if we did not expect some reductions, but 43.3% seems particularly high. I met district council leaders on Friday and they said that they are being led inexorably to the view that Her Majesty’s Government must have a vision for the reorganisation of English local government, but they have not quite worked out what it is yet, and that they are starving them into a form of submission.
Importantly, I welcome the fact that, for the second year running, the Government have delivered the £5 de minimis increase in council tax under the capping regime. If North Dorset takes advantage of that, it will give us an extra £160,000 a year. If we go with 2%, it would give us only £60,000 a year. I invite the Minister to give serious consideration to embedding the de minimis approach in future thinking.
Could we also end the cat and mouse game—it takes place every year—of, “Will they or won’t they cap the town and parish councils”? It is like baiting the lower tiers of local government. Blandford Forum Town Council in particular has made that plea to me. It wants to step into the breach, as evidenced by the 50 grand it is stumping up to help run the local leisure centre. It wants to help fill the vacuum, but at every step and turn it, too, feels constrained, because it does not know from one year to the next whether it will be capped.
North Dorset District Council’s Conservative leader, Deborah Croney, and its chief executive, Matt Prosser, have asked me whether the Minister will consider giving local control over matters such as local planning fees. At present, the council subsidises its planning function with some £600,000 a year, because of the complexity of planning and the very small fees it is able to set.
I have a word of warning for my hon. Friend. I would not wish too strongly for the Government to be given licence to put up council tax and fees even more, because our residents already pay substantially more, even though they are poorer and older. The central feature of the proposed settlement is to stick up an already overly high council tax rate by even more, while subsidising urban residents who are richer and pay less.
I find myself pained, because I disagree not only with the settlement, but with my hon. Friend. Although he is absolutely right to say that this should not become a new cash cow for local authorities, surely to goodness most planning applications are either for very large-scale schemes—I speak with some authority, having been involved in that area for a number of years, and am pretty certain that such schemes could absorb a proportionate increase—or for domestic planning applications that will add value to the property. If someone is having an extension built, they will pay a fee of £120 and then possibly add £10,000, £20,000 or £30,000 to the value of the property, so there could be a small increase to the fee. If we believe in the narrative of localism, that would help local councils to set their own agenda.
I have been asked whether the settlement and subsequent measures take into account both the increase in the national minimum wage and the living wage, both of which are welcome. Frankly, I do not know the answer to that, so I ask it as an open-ended question. At a time of significant reduction, when costs are going to go up, that will be a difficult situation. I have already said that the costs of delivering services in a rural area are, by definition and de facto, more expensive than they are in urban areas. The impact on adult social care, particularly in a constituency such as North Dorset, which is predominantly, though not exclusively, peopled by the retired, would, I fear, be lamentable. I fear for the future safety and security of many of my residents, many of whom will live in what Douglas Hurd used to describe as slight decayed gentility, afraid to ask for help but certainly needing it. I fear that all of us are likely to face a tsunami of headlines, both local and national, concerning elderly vulnerable people who have been caught in this unappetising pincer movement of a reduction in income and being left in their own homes and to their own devices.
In a moment. The Government have been absolutely right to pursue a policy that says that adult social care, particularly of the elderly, is best delivered in the home, not a home, but the reduction in the moneys available to county councils to deliver adult social care turns that welcome policy firmly on its head and renders it undeliverable.
In summary, this is a very poor and disappointing deal for my county of Dorset. My residents and councillors, and the officers who work flat out in my county and district councils, are only asking for equity and fairness. The current proposal delivers neither. It would reduce local government to being neither sustainable nor deliverable. In its current form, I cannot support it.
It is a pleasure to follow my hon. Friend the Member for North Dorset (Simon Hoare). I also thank the Backbench Business Committee for agreeing to hold this debate on rural funding, and I congratulate my hon. Friend the Member for Beverley and Holderness (Graham Stuart), who, for all the time I have been in this House, has been a strong voice and strong leader on behalf of our rural communities and fairer funding.
I will not go into as much detail on rural funding as my hon. Friend the Member for North Dorset, but I will say that I was a Cornwall county councillor from 2001 and I can remember the changes introduced by the then Labour Government, which severely disadvantaged places such as Cornwall. I acknowledge that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Nuneaton (Mr Jones), and his predecessors in the last Parliament have done their best to rebalance the situation.
I am going to focus on rural transport. I was born and grew up in a small village in my constituency, where I currently live. When I first entered the workforce—I worked for the South Western Electricity Board in Plymouth—I had to get a bus, then a ferry and then another two buses to get to work. It took me some time just to get there in the morning and I would have problems if bad weather caused the ferry not to run, as I could not afford a car and therefore could not drive around to the Tamar bridge.
Today I can go downstairs from this place to the station, not look at a timetable and still see a train within a couple of minutes. In many villages, it can take two hours—sometimes days—before there is a train, and some small communities are not served by trains at all. Many work routes are impossible because of the timetables. Although it is clear that a large percentage of the population drive, it is also important to have an alternative. Everyone has periods during which they cannot drive, whether because the car has broken down, because of their age, or medical or judicial reasons, or because they simply cannot get back from the pub as it would be illegal to drive. Unlike in towns, where a local can be found a few hundred metres from home, the same journey in the country is frequently one of a few miles.
Train stations are often at a great distance and transport must frequently be found to go to a station, which means that stations cannot be a solution in their own right. There is simply not the demand for train services in rural areas. My nearest station is 8 miles away. In the neighbouring constituency of North Cornwall, there are no train stations at all. Such forms of transport cost money, especially for those who can least afford them and those who cannot drive.
Although many children in cities can walk to school, the transport infrastructure in the country is far more costly. Children often live a considerable distance from school, and because of their age, they cannot drive. That means a considerable burden on school transport, which often needs to be borne by the local authority before a child can be educated.
One of the things my local authority—like my hon. Friend’s, it is a poor one—would like is the right to allocate the less popular bus routes with the more popular routes so that bus companies can still make a living. That power needs to be devolved.
That is something my hon. Friend the Minister could consider.
There is also a problem with specialist schools, which are often a considerable distance away from where children live. Facilities can also be more difficult to get to. As well as having to travel many miles to the local swimming pool or to see a film at a cinema, we have to look at essential amenities, such as doctors, dentists and hospitals. I worked as a doctors’ receptionist at one of my rural practices for more than 21 years, and I used to try to arrange people’s appointments around the bus timetable, but that was not always possible. My nearest hospital is over the Tamar in Plymouth, and getting there involves a ferry or a long trip around by the Tamar bridge. Google Maps shows it takes one and a half hours to get there by public transport.
Such matters create considerable transport costs for anyone in a rural area, and especially for any local authority that must help people to get around these vast areas. It is simply not financially viable for the private sector to run such services on a regular or affordable basis, as my hon. Friend the Member for North Herefordshire (Bill Wiggin) said. These rural communities, such as my own, need assistance with that extra burden. Last week, I spoke on the importance of food security, and I remind my hon. Friends that it is in these rural areas that we produce our food.
I want to finish with a complaint from one of my long-standing councillors. Councillor Armand Toms from Looe wrote to me recently, although I acknowledge that he must also raise this matter in Cornwall Council. He said in his email:
“Year on year the revenue from the Cornwall Council car parks in Looe is going up hitting the local community and tourism. Yet the town gets very little if nothing in return and has taken on public conveniences which will cost over a million pounds in the next ten years.”
I remind the Minister and my hon. Friend the Member for North Dorset that when town councillors have the ability to increase a precept without being called to account for it, that often has the same effect as raising council tax revenue by the back door. In Councillor Toms’ words:
“I believe that Cornwall Council is treating Looe’s car parks as cash cows.”
Those are his words, not mine. He is a Cornwall councillor, but I point out that he is not a Conservative one.
Does my hon. Friend agree that that is the case right across Cornwall and not just unique to Looe? Newquay in my constituency, which raises more money from car parks than any other town in Cornwall, is just the same. The council keeps putting up the car parking charges, but the town gets very little back.
That is another thing I fully support. If we are providing a public facility, we should at least help town and parish councils to run them—but I digress.
Councillor Toms has claimed, of the whole issue of car parks:
“With the last minister saying that he would do something about this I was wondering what the new minister will do. Can you ask and see what can be done because there is a problem and coastal towns are being hit?”
It is important to find a funding solution for our transport issues in rural areas, rather than to slam these costs on to the motorist time and again. I have some sympathy with the Minister. As a councillor in the early 2000s, I saw the effects on rural areas of the changes made by the Government of the time, and we must rebalance those changes, although I appreciate that that will take time.
I remind the Minister that many people see the car as an essential in rural areas. I certainly could not do my job without access to one. I ask him simply to evaluate these important issues and to reflect on them when he considers local government funding.
It is a pleasure to follow the beautifully presented case made by my hon. Friend the Member for South East Cornwall (Mrs Murray).
I am a former businessman, and fairness was a guiding principle of my business career. I think it will be the most commonly used word in this evening’s debate. Like many of my colleagues, I stood on a platform of getting a fairer deal for our rural areas. They do not get a fair deal today.
The provisional settlement is the opposite of fair. In effect, there will be a 37% reduction in North Yorkshire County Council’s budget, versus an average reduction for metropolitan areas of 19%. Compared with what would happen under a flat-rate reduction, counties across the UK will be £161 million worse off in cash terms in 2016-17, while metropolitan authorities will be £73 million better off. That is a massive redistribution. In effect, council tax increases in my constituency and others like mine will be supporting London and metropolitan areas.
North Yorkshire County Council is one of the biggest losers, on the back of what is already a bad deal. A band D taxpayer in North Yorkshire pays about £1,430 a year, whereas one in Westminster pays £670 a year. Nationally, as my hon. Friend the Member for Beverley and Holderness (Graham Stuart) pointed out, people in rural areas pay about £81 a year more in council tax, but get about £130 less in their settlement funding allocation. We pay more, we earn less and we get fewer services.
Services are harder to deliver in rural areas. We have many bus passes in Thirsk and Malton, but very few buses because it is so difficult to provide buses on a commercial basis and it is getting more challenging to do so. All we are asking for is a fair deal. We welcomed the increase in the rural services delivery grant to £65 million a year, but that is back-loaded. Effectively, in 2016-17 it will deliver only about £4.5 million. The gap is widening, not narrowing. That is happening on the back of other areas where we do not get a fair deal, be it healthcare or schools, although huge progress has been made in this Parliament to remedy that situation.
My hon. Friend is right to highlight the Government’s promise to bring in fair school funding. We all welcome that. However, in the last Parliament, when reductions were made in local government funding, they were uniform. If the Government saved 11%, everybody’s grant was cut by 11%. That did not close the gap, but there was the development of the rural services delivery grant. In this Parliament, the proposal is that metropolitan areas will see their local government grant reduced by less than 20%, but in his area it will be reduced by 30%-plus. Does he agree that that is not acceptable, as it will make an already invidious situation even worse?
I absolutely agree. I hope that this campaign will be as successful as my hon. Friend’s campaign for fair funding for rural schools.
This debate is not about the size of the cake. Local authorities need to share the burden of balancing the books. Governments of both colours have run deficits for 28 of the past 34 years. We are still running a deficit this year of about £75 billion. We need to make cuts. The challenges ahead will be about increasing social security budgets. Sixty years ago, social security accounted for 11% of spending. It now accounts for 28%. Health spending has gone from 7% of spending to 18%. Those issues are particularly profound in rural areas. We know that we need to make cuts. There is no alternative that will balance the books.
This debate is not about the size of the cake, but about how the cake is divided. North Yorkshire expected a flat-rate cut, which would have meant a 27% reduction. That is a challenging reduction. In the words of our chief executive, it would be “tough but understandable”. The proposed 37% reduction, which amounts to £23.7 million, is £6.9 million worse than a flat-rate reduction. The social care precept on the council tax will raise only £4.8 million, so we will be £2 million worse off, and that money is supposed to help our adult social care—another very profound issue in my constituency, which has seen huge increases in the elderly population. There will be a 20% increase in the number of over-65s and a 50% increase in the number of over-95s in the next five years.
We need to make sure that we get a fair deal. Of course, local authorities need to play their part in that. They need to develop greater synergies and more efficiencies. In the local authority area of North Yorkshire County Council, there are nine local authorities. I do not know how sustainable that number is in the longer term. I fully support reorganisation. At a time when we are losing services, local government must be more efficient.
One could say that local authorities should use their reserves, but many of those reserves are committed, particularly to flooding schemes, for which we have seen an increased need in my area over the past few weeks, and to supporting the roll-out of broadband, improving our roads and filling in potholes. There is a feeling among my constituents that we are not getting a fair deal, so I call on Ministers to revise the proposal to ensure that there is fairness for people in both urban and rural areas.
I congratulate my hon. Friend the Member for Beverley and Holderness (Graham Stuart) on securing this debate and on the fantastic work he has done in this area, particularly on the Rural Fair Share campaign, of which I am very proud to be a patron.
I will address my remarks principally towards North Devon, but will start with some general comments. We must remember from the outset that we are talking about taxpayers’ money, so it is right that we take careful decisions. I get that. All areas of spending have to be reviewed. The Government are making considerable progress in putting the nation’s finances on a sound footing, compared with what we inherited. I get that too and the people of North Devon also get it.
However, this settlement raises considerable concerns for North Devon. First, the overall grant for North Devon District Council is reducing from £4.9 million this year to £4.18 million in the next. That does not sound like a big figure, but it is a significant reduction for a small local authority. I have met the leader of the council, Councillor Des Brailey, and he has left me in no doubt whatever that he faces some very difficult decisions as a result of the settlement.
I want to pick up on a couple of points that have been made by hon. Members on both sides of the House that are relevant to the challenge faced by North Devon District Council. I am delighted that the hon. Member for Workington (Sue Hayman) is co-sponsoring the debate. It is good that it is a cross-party initiative, although the Liberal Democrats are conspicuous by their absence. None the less, the hon. Lady made a very good point about visitors to her area and mine. North Devon prides itself on being a very popular tourist destination, but we get not a penny more for the extraordinary increase in, in effect, the population of North Devon that occurs for several weeks of the year. This settlement does not take account of that fundamental unfairness.
My hon. Friend the Member for North Dorset (Simon Hoare) made a very good point about areas of deprivation and coastal areas in particular, as did my hon. Friend the Member for South East Cornwall (Mrs Murray). He said that we have areas of coastal deprivation that often go unnoticed. I have invited the Minister to visit Ilfracombe in my constituency. I am sure that his response is in the post. In Ilfracombe, I have one of the most deprived wards in the south-west. That is something that North Devon District Council has to deal with, but this settlement does not allow it to do so.
We must also consider the extra money that the Government give to rural areas such as North Devon. Yes, I am delighted that that is being increased nationally to £65.5 million in the next four years, but it is being back-loaded, not front-loaded, and there will be only marginal benefit to North Devon next year. The total figure is considerably lower than the £130 million increase that was calculated by the Rural Fair Share campaign, and it will simply get us to a standstill—it is considerably less than what is required.
The settlement figure for Devon County Council has also been reduced, which is a worry because that will simply add to the pressures on local services and council tax payers in North Devon. To set a balanced budget for 2016-17, Devon will need to make savings of more than £34 million, on top of savings made in the past five years, which amount to £174 million. That is a huge reduction and a huge challenge for Devon County Council.
The two authorities to which I have referred—North Devon District Council and Devon County Council—are both well-behaved, competent, Conservative-controlled councils. That is the point: councillors and officers are working hard to deliver good services and value for money for the taxpayers of North Devon. The Government should be helping them to do that, although I fear that with this current settlement, they are not doing so.
The system in Devon is slightly different from that in Cornwall because we have a unitary authority and Devon has a two-tier primary authority system. Does my hon. Friend notice that his constituents are having excessive council tax imposed on them by services being offloaded from the district and county authority on to town and parish councils, as is happening in Cornwall?
We could happily spend considerable time on the debate about unitary versus multi-tiered authorities, but my focus is to ensure that whatever system we have presents value for money to council tax payers. That is what is being delivered by Conservative-controlled North Devon District Council and Devon County Council, and the Government need to assist them in that.
My hon. Friend makes a great point on behalf of his local councils, which very much mirrors my own experience in High Peak. Almost 10 years ago we entered into a shared service review with Staffordshire Moorlands, thereby saving our council tax payers a lot of money. It was a trailblazing scheme across regions and across the county, yet we have all the problems that my hon. Friend mentions about tourism and we do not even qualify for the rural services delivery grant. We are being kicked twice, and it is making life extremely difficult for what is a prudently and well-run Conservative local council in the High Peak area.
My hon. Friend makes a strong point on behalf of his area which, as he says, is mirrored in North Devon.
In 2016-17 some specific grants were included in the funding base for Devon County Council, and if those are excluded to give a more accurate like-for-like comparison, the reduction in grant for that council is 17.4%, compared with an average of 16.6% for the shire counties. Not only do we as a rural area do worse in comparison with urban areas, we are even doing worse in comparison with other rural areas. That seems something of a double whammy for Devon.
At the other end of the local government spectrum, let me echo a point that was ably made by my hon. Friend the Member for North Dorset—he has just retaken his place. He noted how one of his town or parish councils had complained how difficult it was to plan ahead because of the annual “will they or won’t they?” capping saga, and exactly the same point was made to me by Barnstaple Town Council, which has the same horror to face every year. That is stopping it planning ahead and adequately providing the services that it needs to provide, and I urge the Minister to consider that.
There are some beneficial aspects to the settlement. I accept that the rural urban funding gap is gradually closing, and the longer, four-year settlement period is welcome as it will help local authorities considerably with their forward planning. We will not have that worried look at the Advent calendar every December to wonder when the settlement will come and what it will be, and I welcome those two points.
I hate to interrupt my hon. Friend as he moves to his peroration, but I do not believe that there will be any closing of the gap. The proposal is precisely for lower reductions in the central Government grant for metropolitan areas than for rural areas and, even with the increase in the rural services delivery grant, we will see a widening, not a closing, of an already iniquitous gap.
I am sure the Minister will clarify that. I was coming on to say in my concluding remarks that although those two elements appear to be welcome, they are not enough. I say that quite plainly to the Minister.
I am disappointed overall. I believe there is more we can do as a Government to assist areas such as North Devon. That is why I have written to the Secretary of State. I have in my hand a piece of paper: a letter I have written to the Secretary of State. It is designed to be helpful and to suggest ways in which we could, as a Government, help areas such as Devon, in particular North Devon. I hope we can achieve a fairer settlement for these areas. I look forward to working with the Minister, his colleagues and other colleagues in areas similar to mine to help to make that happen. I say this gently but firmly to the Minister, and, I have to say, with some regret: at the moment, the Government have got this wrong. We have time to put it right and I appeal to the Minister that we do so, for the sake of North Devon and other rural areas.
I would like to start by introducing a bit of balance, to make the Minister aware that we are not all entirely against him, and welcome the commitment the Government have made to equalise spending on schools. My hon. Friend the Member for Beverley and Holderness (Graham Stuart) secured an excellent debate in Westminster Hall at the end of last year in which we were able to advance our views. We had some very encouraging responses from the Minister’s colleague, the Under-Secretary of State for Education, my hon. Friend the Member for East Surrey (Mr Gyimah).
We very much welcome the investment the Government are making to tackle poor broadband connections in rural areas, their commitment to encourage the mobile phone industry to tackle “not spots”, their welcome commitment—this is particularly important in Somerset —to improve flood defences in our county, and some very important improvements to our road and rail network, so it is not all bad. While imperfect, these Government funding commitments are very welcome and will be an important development to our local economies. It would just be great if they could be accelerated.
That said, Somerset is among the worst-funded local authorities in the country. Currently, those in Hackney receive well over three times the amount per head than residents in Somerset. I do not doubt there are plenty of challenges in Hackney, but it is important that the House recognises that there are plenty of challenges in rural areas too, many of which have been articulated well this evening. I will come on to talk about some of those challenges in my area, but it is important to realise the real deprivation in rural areas too. Some of the most deprived wards in the south-west of England are in my constituency, yet they are in towns and villages that, if I were to list them, would make people picture something very different from the reality of some of the lives of their residents. There is digital exclusion, too, and an isolation that is not felt in urban areas. Lower average earnings, a deteriorating demographic, and poor road, rail and bus connections add to the deprivation I have just mentioned.
Given the challenges we face in Somerset—and in Dorset, Devon, Cornwall and all the other places represented here this evening—one would imagine that the funding formula would be set to close the gap. Sadly, that is not the case. Urban areas will lose about 21% of their funding in the next five years, but in Somerset we will lose 26%. There will be Members in the Chamber whose counties will be losing even more than that. As a proportion, the gap is widening not closing.
It is important to place it on record that our local authorities in Somerset are guilty of good behaviour. They have already been riding to the instructions the Government have set. Sedgemoor District Council recently announced a co-operative working arrangement with South Somerset District Council, which crosses the partisan divide. There is a sharing of chief executive and there are greater synergies in the back office. Mendip District Council has a fantastic hub in its council offices, which brings together police and other local services so they can all take advantage of that council building and achieve a saving. Indeed, it has been outsourcing many of its functions to achieve greater cost-effectiveness.
Somerset County Council, too, is guilty of good behaviour, having worked incredibly hard to tackle the enormous debt left by the previous Liberal Democrat administration—no matter how much the latter try to forget it when criticising the council. It is heavily involved in joint working with Devon, North Somerset, and Bath and North East Somerset, and is considering the smarter use of buildings. Particularly successful is how it is trying to use libraries: Glastonbury library will soon be overhauled and be a place not only for books and the internet but to see the police, the citizens advice bureau and local council and public health representatives —all sorts of things delivered under one roof, achieving a welcome saving for local government.
This evening, we have heard many examples of the challenges of rural life and the expense, both public and private, to our constituents. On a particularly pressing issue, Glastonbury, which Members might consider to be a significant place, has recently discovered that all three of its remaining banks are to close within 12 weeks of each other. It is an extraordinary thing to happen in a place as important and internationally famous as Glastonbury, yet it is going to happen. All those who walk to the bank in Glastonbury, many of whom are elderly or less mobile, will now have to get the bus to Street or elsewhere. The banks will say, “You can do all this online”, but these are the people, even if they have the connectivity, who are least comfortable online. They will travel on the bus, requiring a public service they would not have needed if at least one of the banks had stayed.
We in rural areas pay the same for our mobile phones and internet connections as those who live in urban areas, yet we get so much less, and we travel further for our healthcare. Some appointments are inaccessible for those who rely on public transport. There are parts of my constituency from which one cannot reach Taunton, Yeovil, Bath or Bristol for an out-patient appointment, or from which it is extraordinarily difficult to reach a GP surgery or health clinic. I have met constituents who allowed minor conditions to fester because they put off making the journey until it became sufficiently urgent that they needed an ambulance to hospital. That cannot be right.
I have met young people in my constituency who allow the cost of public transport, or their inability to access a council-funded bus pass, to influence their decisions about the qualifications and education they seek post-16. It is ridiculous that they should limit their life chances because they cannot afford a bus pass to get to college to complete their A-levels, apprenticeship or something else.
My hon. Friend the Member for South East Cornwall (Mrs Murray) spoke eloquently about carparks. Free parking is very important to the rejuvenation of our high streets, yet local authorities are over a barrel because parking has become an essential part of their revenue generation, meaning they cannot free up free parking because they would risk no longer being able to balance their books. That is a real challenge.
Adult social care, which we have spoken about already, is a huge and growing expense. The south-west, and Somerset in particular, is a popular place for retirement. I welcome that and think we should celebrate it—it is because it is simply the most beautiful region in the UK—but that growth in the retired population comes at an extraordinary cost. I met a carer before Christmas who told me that her clients for a day were spread over 300 square miles. That means that that carer can see fewer people than her counterpart in an urban area, which means that the cost of adult social care is so much greater in our part of the world.
Very briefly on vulnerable older people, I was shocked to discover that nearly 300 elderly people died in Cumbria last winter because they did not have proper heating or were not able to look after themselves properly. If the cuts to rural authorities continue, I am concerned that carers will not spot these vulnerable people as they have in the past and the problem will be exacerbated. Does the hon. Gentleman agree?
I very much agree with the hon. Lady. I, too, have been struck by what I have heard when I have met social care providers in my constituency. While I trust absolutely that they would deliver first-rate care on their visits, they have been imploring me to get permission for them to visit people just once a day for 30 minutes, rather than twice for 15 or 20 minutes. That might make sense, in that ultimately the person will be getting one, better quality visit, but it would reduce the contact that these vulnerable people have with the outside world and extend the length of time they go without seeing anybody who is supposed to be keeping an eye on them. That is a challenge we face, and we may have to go for what the care providers are suggesting, but it would come at considerable risk.
That is an example of just how expensive it is to do these things in our parts of the world, and the Government need to recognise that in the way they fund local authorities. We understand well—certainly those of us on the Conservative Benches—the Government’s need to balance the nation’s finances. I have been struck by the sentiment expressed this evening, which is very much not that we expect more from the Government but that we expect fairer spending in what they have already committed to spend. I implore the Government please to implement the rural services delivery grant not in part but in full, and as early as possible; to incentivise our councils by confirming that they can keep all that they raise in rates; and to commit to ending the inequality between urban and rural funding, albeit not by asking rural residents to bridge the gap by paying higher taxes, when, as I have said, they are already enduring a higher cost of living, and on lower wages too.
Above all else, let us certainly commit to ensuring that the gap will not widen on this Government’s watch. Sparsity ensures that the cost of doing things in places such as my constituency is more expensive than doing them elsewhere. As I have said, carers spend longer in their cars. School buses are required to carry more pupils over longer distances, which requires more fuel, and the same goes for rubbish and recycling trucks. Less can be done online because there simply is not the connectivity. We pay more in tax and receive less in Government spending, and all to achieve the minimum in local authority service provision. We are asking Somerset County Council to achieve something akin to alchemy. While I applaud it for doing a very good job indeed, it is little wonder that things such as bus services, libraries, road improvements and myriad things besides—things that we would think of as essential to providing the grease for rural life—are coming to be seen as discretionary.
In rural areas we face deprivation, isolation, higher taxes and a contraction of the local services that are so valued and needed by our constituents, and we risk making that worse, not better, under this Conservative Government. I urge the Government to find another way. We must spend our money more fairly and bridge the gap between rural and urban.
I am glad to follow my hon. Friend the Member for Wells (James Heappey), not least because the name of his constituency is easy to remember and pronounce.
Fair funding for rural areas is something we have argued for in west Cornwall for as long as I can remember. The truth is that over successive Parliaments we have received less money per person than many urban areas. Over the years, this has affected our ability to care for our elderly, educate our children, provide public transport, deliver our health services, care for people with severe learning difficulties, police our streets, invest in our infrastructure and deliver council services, including refuse collection, public toilets and maintaining rural roads. All those have suffered as a result of years and years of underfunding.
This matters because my constituency continues to have some of the most deprived communities in the country. This debate, it seems to me, has largely been a competition about what level of deprivation can be found in each constituency. What I can say for Cornwall is that we are so deprived that the whole of Europe recognises it by giving us shedloads of money to try to put it right! It is fair to say that west Cornwall and other Cornish councils probably have the most deprived areas.
I welcome that intervention, as it raises a point that I was just about to make.
Over the years, rather than give us fair funding, Government grants and generous handouts from Brussels have attempted to address deprivation, but the reality is that unless people can plan properly for the future, get fair funding and properly invest in public services, we cannot address the issues surrounding deprivation and how to lift people out of a poor environment. We need proper funding and we need to know that it is going to be fair to help us to plan for the future.
Three things provide encouragement and convince me that we can address the challenges that a rural area such as west Cornwall faces. The first is that the Government recognise the additional costs of delivering services in more sparsely populated areas. The second is that this Government have begun to address the gap between funding in urban and rural areas. The third is that people who deliver services in Cornwall are now working hard together to a greater extent than at any previous time, and that there is the political will to bring about the necessary changes to secure good services for the future. However, the provisional local government settlement announced just before Christmas threatens that good work and has the potential to undo all the work that has been done to deal with the problem of fair funding for rural areas.
I welcome this Government’s recognition of the additional costs of delivering services in more sparsely populated areas. I welcome the extra £65 million made available through the rural services delivery grant. By the Government’s own calculations, however, that should be £130 million. The truth is that rather than close the gap in funding between urban and rural areas, the provisional Government funding settlement widens the gap over the next four years, which is a disaster for areas such as mine. Cornwall Council, which Cornish MPs met on Friday morning, has the opportunity to charge a 2% levy, but it learned that 75% of that would be taken up just to meet the commitment to the living wage. It has the power to increase council tax by 4% each year.
That does seem peculiar, but this Government have introduced a generous living wage that will give many people the opportunity to earn more money and increase household incomes.
The reality is that if we ask council tax payers to contribute an extra 4% each year, without taking into account any increases that town and parish councils might have to include, it will have a detrimental effect on one of the poorest areas of the country. For years, the Conservative-led Government and the Conservative-led Cornwall Council froze council tax, but unless this Government properly address the issue of underfunded rural areas, councils will have little choice but to increase council tax to the max. Thus my constituents, many of whom are among the poorest in the UK, will have to pay 20% more in council tax in 2020. I said earlier that Cornwall has the leaders and the political will to reform public services. However, true reform requires extra cash, not less, if councils are to improve services today and save money tomorrow.
Now is the time to give fair funding to councils such as mine, rather than increasing the gap further. I ask the Government to reconsider the settlement so that councils such as mine have the money they need to deliver the services we need, and so that they feel valued and part of the optimistic future in which we all want to share. I say to the Government: please do not leave Cornwall behind any longer.
I, too, thank the Backbench Business Committee for giving us the opportunity to debate a very important issue.
I share many of the concerns that have already been expressed by other Members. The historical imbalance between the Government’s funding of rural communities and their funding of urban areas is stark. One aspect of many rural communities is remoteness. All counties are distinctive, but the Isle of Wight is particularly remote. That, of course, is due to our unique separation from the mainland by the Solent.
The Government are doing their best in very challenging circumstances, and Isle of Wight Council is also doing its best. Most councillors understand that they must make difficult decisions, and that just moaning does not solve anything. The council is currently led by a group of independents, and that makes its position even harder. There is no underlying political philosophy pulling the group together; it consists of individuals whose views encompass a wide political spectrum. I do not envy the council’s leader, Jonathan Bacon, who must try to pull them all in the same direction.
The council recently asked to meet the Minister, and I was glad to arrange a meeting. Councillor Bacon very sensibly invited the leader of the largest opposition group, Conservative councillor Dave Stewart, to join the delegation. They outlined the problems very clearly to the Minister, who recognises the island’s uniqueness and the challenges it brings, and also realises that the council cannot do some things that mainland authorities can do to save money. The council will now make some suggestions, which were discussed as a formal response to the consultation on the draft settlement, and I hope that some amendments will be made as a result.
I have never been a supporter of the European Union. It is a meddling, costly, unnecessary bureaucracy, and we should leave at the earliest possible opportunity. However, since as far back as 1997, the remoteness of islands has been an important European issue. The conference that adopted the treaty of Amsterdam recognised
“that island regions suffer from structural handicaps linked to their island status”,
and acknowledged that
“specific measures may be taken, where justified, in favour of these regions”.
We want the Government to look at the problems facing the Isle of Wight in the round. When necessary, unique answers to our unique problems should be considered. The challenges faced by the Isle of Wight, in common with other island communities, include difficult employment conditions with much seasonal work. The high cost of cross-Solent transport handicaps economic growth, limits access to mainland opportunities and affects tourism, which is a key plank of our local economy. Visitors to the Isle of Wight numbered 1 million last year alone. We also have a high proportion of elderly residents with very high costs of care. Education standards are low, and, although a ministerial directive to bring in support from Hampshire has helped, there is still a long way to go. Isle of Wight residents deserve access to high-quality services every bit as much as people on the mainland. Isle of Wight Council has made some suggestions. I urge the Government to work with the council to help it to deliver for islanders.
I would like the Minister to set out what would happen should any council be unable to meet its statutory duties. It is not always clear when that might be— in effect, where the “tipping point” is. For example, some services must be at “reasonable levels”; similarly vague wording is also used. Who is to judge when “reasonable levels” across a range of statutory services cannot be met? Once such a judgment is made, what happens? We are dealing with, among others, vulnerable people. In such a scenario, what becomes of them? I am not the only one asking such questions and the Library has been unable to answer my question. I look forward, therefore, to hearing a great deal more about that in the closing speeches.
I congratulate the hon. Member for Beverley and Holderness (Graham Stuart) on securing this important debate through the Backbench Business Committee. It is a critical topic. I look forward to hearing the Minister’s responses to the many excellent points that have been made across the House.
I represent Croydon North, which is perhaps not the most rural constituency, but at heart the debate is about fairness, and that is a matter that concerns us all, wherever we represent in the UK. The most unfair aspect of the Government’s spending review is how they have targeted the biggest cuts on the poorest areas. They have placed the greatest burden on those least able to bear it. Our rural communities are among those that have been the hardest hit.
There are real issues of poverty in rural areas. We have heard Members talking eloquently about those issues during the debate. Households in rural areas are more likely to be in fuel poverty than those in urban areas. People living in rural communities find it harder to access key services such as schools, hospitals and shops. As my hon. Friend the Member for Workington (Sue Hayman) said, often that is because of poor, limited public transport. Housing costs are spiralling out of many people’s reach, yet despite all that the Government’s latest spending plans do little to address the growing pressures on rural communities.
Social care has been referred to in the debate. It is a particular problem. The proportion of older people is higher in rural areas than in urban areas; I was impressed by the comments by the hon. Member for Thirsk and Malton (Kevin Hollinrake) in that respect. That means these communities will be hit the hardest by the £1 billion funding gap in social care that the Local Government Association, which is Tory led, estimates still remains. That is assuming that every council in the country levies the Chancellor’s 2% council tax precept, and that is not a foregone conclusion.
Families in rural areas spend almost £800 more than the national average on transport. Under the Conservatives, rail fares have gone up by almost 25%, yet complaints about train services are rising in all parts of the country. Services in rural areas are often unreliable, where they exist at all, and rolling stock is often out of date.
Fares have gone up by 27% since the Prime Minister first entered Downing Street, yet fewer than half of all small rural settlements have a regular bus service. Rural communities should be able and should have the power to regulate their own bus services, as London can, helping to ensure that the right services are available at the right fare.
Low pay is endemic in many rural communities. The gap between urban and rural wages has grown by £1,000 since 2010, yet the Government have abolished the Agricultural Wages Board. Research shows that, after London and Oxford, starter homes are least affordable in rural areas. Housing costs are soaring while the Government have allowed rural wages to decline. Now, to make things worse, the Government are forcing councils to sell off what little affordable social housing remains.
Cuts in funding have had detrimental effects on all sorts of services. We have seen youth services close in rural communities. Communities have been plunged into darkness when councils have been forced to switch off street lighting during the night. Neighbourhood policing has been decimated to such an extent that Her Majesty’s inspectorate of constabulary has reported that car crime has been all but decriminalised, and cuts in vocational training and further education mean that people are unable to develop the skills they need for taking up employment opportunities in rural communities.
The hon. Gentleman is making a powerful speech; it is incorrect in only one way. Earnings have not dropped in rural areas; they simply have not grown as fast as they have in urban areas, such has been the economic success of this Government. The case he is making illustrates the need to close the gap between urban and rural areas, whatever the Treasury sets as the overall budget. Is it now the Labour party’s official policy to reduce and close the gap in spending power between rural and urban areas?
The hon. Gentleman is right to say that there is a decline in wages relative to the cost of living in those areas. The Labour party is looking for fair funding across the Government, and I will say more about that later if he will allow me.
Pulling all that together, we are seeing a toxic cocktail of rising fares for worsening public transport, inaccessible public services, demand for services rising faster than funding, fewer good job opportunities, falling wages and soaring housing costs. People are being priced out of living and working in rural areas.
These are simple questions that require a yes or no answer, and the hon. Gentleman cannot hide behind the obfuscation that he wants to see fair funding. Does he believe that the allocation of funding should be done on a fair and equitable basis? Does he believe that the gap between rural and urban authorities should be closed? Yes or no?
I am afraid that I can insist on fair funding. I believe that when resources are available, they should follow need. Unfortunately, that is not what is happening under this Government. I spent a few happy days in the hon. Gentleman’s constituency over the new year—I spotted a marvellous picture of him on the notice board in Milton Abbas—but I understand that such areas are suffering because the Government have not managed to get this right.
Previously we have heard the Government talk about an alleged improved funding settlement for rural areas, and perhaps we will hear that again from the Under-Secretary of State for Communities and Local Government, the hon. Member for Nuneaton (Mr Jones) this evening. That is not what we have been hearing from his own Back Benchers today, however. The Government have been trying to play off poorer rural areas against poorer urban areas, but this cannot be a race to the bottom. This should be about helping communities in every part of the country to thrive.
I will not, if the hon. Gentleman will forgive me. I am supposed to take only 10 minutes for my contribution.
Despite a string of assurances from the Government, we still have no idea how they will ensure a fair share-out of funding once business rates are localised. They have failed to make any announcement on how an equalisation mechanism might work, despite promising that such an announcement would be made during the autumn statement. Rural authorities remain concerned that the localisation of business rates could work against them, depriving them of funding and allowing them to fall back in relation to non-rural areas.
I thank the shadow Minister for giving way. I understand from the Chair that there is no time limit, so he has time to take our interventions. I say this to him in the softest way, because tonight’s debate has been refreshingly non-partisan. Rural Britain is listening, and it is not clear that you are advocating a rebalancing to close the gap. My apologies, Madam Deputy Speaker—I have just committed a deadly sin! It is apparent to me that the shadow Minister is not committing to a rebalancing between urban and rural areas. I invite him one more time to commit to that, so that we can all be clear that that is Labour policy.
I do not think either rural or urban Britain would welcome the hon. Gentleman’s implication that this should be a race to the bottom, with one part of the country competing against another. Resources should follow need, fair and simple. That is what will lie at the heart of a fair funding mechanism, which I hope the Minister or someone from the Government will be able to announce to us before very much longer.
The rural authorities that have the concerns I have expressed are right to be worried. Westminster City Council, which covers the major shopping centres in central London, collects 8% of all of England’s business rates income—that is more than Birmingham, Manchester, Sheffield, Liverpool and Bristol combined. Without a fair redistribution system, rural communities, like other communities in the country, will simply be left to sink. As my hon. Friend the Member for Workington (Sue Hayman) pointed out, many businesses in sparsely populated rural areas pay little or no business rates. The Government have failed to invest in the world-class broadband infrastructure that could and should be a catalyst for business growth in those areas. There is simply no capacity to replace funding that will be lost when the revenue support grant goes.
The Government like to talk about their commitment to devolution, but we know that that is not real from the fact that the Secretary of State who sponsored the Cities and Local Government Devolution Bill is also sponsoring the Housing and Planning Bill, which contains more than 30 measures taking power away from local communities and centralising it here in Whitehall. Rural communities are feeling the gap between reality and Government rhetoric the most. The biggest devolution deals have been agreed with city regions, leaving most county areas and rural areas to fall behind yet again. Those areas need to be a full part of the devolution agenda, too; they cannot just be a footnote to city deals.
Rural areas have had a raw deal for a long time; they have been cut out of funding, investment and new powers. I welcome this debate, in which some excellent and interesting points have been made by Members from all parts of the House, and I hope that this evening might mark a turning point in the Government’s neglect of rural Britain.
It is a pleasure to respond to this important debate, and I start by congratulating my hon. Friend the Member for Beverley and Holderness (Graham Stuart) and other Members on securing it. I pay tribute to their valuable contributions and, in particular, to the great passion that my hon. Friend and colleagues have shown for our rural areas. I would like also to take this opportunity to recognise the hard work and dedication of rural authorities across the country over the past five years and their contribution to improving local services in challenging times. It is local knowledge, experience and capability that will help to overcome the challenges faced by rural communities, to improve local services and to grow rural economies. We are committed to supporting rural areas in fulfilling that role.
We recognise that rural communities face particular issues, and that some rural councils with low council tax bases face particular pressures. That is why we are determined to continue tackling the deficit to secure the country’s economic future, while also providing help and support to rural authorities. We want rural areas to contribute to and benefit from economic growth. The rural economy is worth £210 billion. Our rural development programme for England has invested more than £400 million in projects to support the rural economy, and we are investing a further £3.5 billion by 2020. We are also investing £780 million for areas that commercial broadband coverage will not reach. To support areas further, we will grow the local growth fund to £12 billion by 2021.
In December, the Secretary of State announced an historic four-year settlement for local government, on which we are consulting until the end of this week. Our proposal is designed as a sustainable pathway to transform over-centralised Britain into one of the most decentralised countries in the world. By 2020, local government will be entirely funded by its own resources—council tax, business rates, and fees and charges—which was never thought possible until very recently.
Since the beginning of this Parliament, we have been honest about the fact that this change must be fiscally neutral, and that we would phase out Government grants and give councils new responsibilities. We are currently consulting on the settlement, and all councils, including those from rural areas, and Members of this House are welcome to respond. Indeed, we can take many comments made by Members this evening as representations to that consultation. I have also already met a large number of local councils, as well as the Rural Services Network today, as part of that consultation. We had a very constructive discussion and I encouraged them—as I have encouraged all local authorities—to set out in full their detailed observations and suggestions in relation to the consultation.
We want to be candid about our proposal. It does require continued savings from local government in order to meet our deficit target, which should not come as much of a surprise to anyone. The unanimous view across local government is that the biggest cost pressure is on adult social care, which a number of Members have mentioned. Our introduction of the 2% social care precept flexibilities for adult social care and the additional £1.5 billion of extra funding for the better care fund, which will all go to local government, will help to address that, but we do not underestimate the challenges ahead. That is why we argued for the possibility of a four-year budget deal, so that authorities that are affected can look at ways in which they can smooth the path over the four years and use reserves, if they feel that that is appropriate and can be justified to the local authority. However, we also want to make it absolutely clear that, despite invitations to do so, we have made no assumptions in our published figures that councils will use their reserves, whereas the Office for Budget Responsibility assumes that councils will continue to add to their reserves during the spending review period.
Many rural residents will ask why it is that, given the need to make savings, the reductions in central Government spending power are disproportionately reducing more in rural areas than in urban areas. By 2019-20, Government-funded spending power in the East Riding of Yorkshire will be £214 per head, while in Kingston upon Hull it will be £468—a 14% reduction in Hull and a 28% reduction in the East Riding of Yorkshire. How is that right or fair?
My hon. Friend has made that point a number of times. It is a significant contribution to the current consultation. I will come on to that point, but the package that we have put forward for local government will continue, notwithstanding his comments, to see a narrowing of the gap between the core spending power for rural and urban authorities.
I am enormously grateful to my hon. Friend. The four-year period to reduce and remove the RSG is understood across the local government piece. Will he advise me what I can say to Dorset County Council, and indeed what colleagues from Buckinghamshire can say to their county council, about what happens in two years’ time when the RSG disappears? All their budgetary planning is now shredded.
That brings me back to why we introduced a four-year settlement. In a moment, I wish to talk about the move to full business rate retention. Hopefully, within those comments, I will be able to reassure Members that, at this point, it is by no means a done deal.
We have given careful consideration to the challenges that rural areas face. That has led us to propose an increase in support for the most sparsely populated rural areas by increasing the rural services delivery grant from £15.5 million this year to £65 million in 2019-20.
As hon. Members know, the new homes bonus was due to come to an end, but our view is that it has been a useful contributor to the increase in planning permissions being granted, with payments since its introduction in 2011 totalling just under £3.4 billion, reflecting the building of more than 700,000 new homes and the bringing back into use over 100,000 empty homes. We have been able to retain the new homes bonus, subject to reforms on which we are consulting and on which views are being encouraged.
Overall, our proposals are fair. Core spending power for councils will be virtually unchanged over the Parliament—£44.5 billion in 2015-16, and £44.3 billion in 2019-20. This is a substantially slower pace of spending reductions than councils had to deliver between 2009-10 and 2015-16.
The rural-urban funding gap has been falling year on year. Between 2012-13 and 2015-16 it went down by over £200 million, decreasing from 11% to 6% for unitary authorities and from 19% to 11% for districts. Our proposals mean that it will continue falling throughout this spending period, and core spending power will increase by 0.2% for rural areas, compared with a 0.7% reduction for urban areas, by the end of the Parliament.
I hear what my hon. Friend says. Council tax is now 11% lower in real terms than it was in 2010. The Government’s assumptions do not assume a 2% increase in council tax, but a consumer prices index inflation increase in council tax. The calculations also show that once we get to the end of this Parliament, if councils were minded to take up the flexibility that has been offered, council tax would still be lower in real terms than it was in 2010.
My hon. Friend is doing the best he can and is doing exceptionally well, I am sure. He said that the increase would not be as high as anticipated, but what is the expected increase in council tax that the Government are planning for? That is what we want to know.
It is down to local authorities whether they feel it right to increase council tax. As I said, the increase that has been built into the figures is 1.3%, which is currently the rate of inflation, and that does not factor in, as I said, an increase up to the 2% referendum principles.
Let me deal with the issue that my hon. Friend the Member for Beverley and Holderness raised in relation to full business rate retention. I can assure the House that a number of consultations are still to be undertaken on full business rate retention. No details have been finalised on how that system will work. Obviously we need to ensure that no areas are left behind when we move to the new system, which has been welcomed, as hon. Members have said, and that includes safeguarding a number of rural authorities that are not in as strong a position as many urban authorities when it comes to raising business rates.
We also need to ensure that we incentivise local areas to increase their business rate base and increase growth and the jobs that come with it. We need to look at that in the context of balancing that reward with the risk associated with challenges on revaluations and when business rates are no longer collected. Such instances were mentioned earlier in the debate. I just want to reassure my hon. Friend the Member for Beverley and Holderness that the Government are considering that very carefully for the future.
My right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) made an extremely powerful case for county areas that include both rural and urban areas. The hon. Member for Workington (Sue Hayman) put the case for Cumbria and mentioned the challenges faced by rural authorities, particularly those affected by the recent flooding. The Government obviously have a great deal of sympathy for the people facing those challenges in Cumbria. We have put forward a significant support package of £60 million to help people in places, such as Cumbria, that have been significantly affected by the recent flooding.
My hon. Friend the Member for North Dorset (Simon Hoare) raised a number of issues. He said that he would like to see more opportunities for district councils to implement a £5 increase in their council tax, rather than the 2% referendum principle. He mentioned the challenge around local planning fees, which I am sure is something we will take on board. He also mentioned the importance of adult social care, as did my hon. Friends the Members for Thirsk and Malton (Kevin Hollinrake) and for St Ives (Derek Thomas) and a number of other colleagues. As I said earlier, the Government are putting forward an additional £1.5 billion through the better care fund. I would like to reassure hon. Members that, unlike the current iteration of that fund, the £1.5 billion will all be going to local government.
I completely agree with my hon. Friend the Member for South East Cornwall (Mrs Murray) that car parking should not be used, as she put it, as a cash cow. The figures we have prepared certainly do not take into account any increase in fees and charges that local authorities might wish to make.
My hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) made a number of points, one of which was the need, in his view, for local government reorganisation. The Government are willing to listen to proposals, but I am sure that he will know that they must be local proposals that are brought to the Department.
My hon. Friend the Member for North Devon (Peter Heaton-Jones) made a number of points. He mentioned coastal deprivation, which is an extremely important point. He will be glad to know that the coastal communities fund has been extended for another three years, with £90 million. He invited me to visit Ilfracombe, and I look forward to doing so the next time I am in that neck of the woods. During the summer I spent several periods in Cornwall and Devon on visits. I was extremely impressed by the approach of many areas, particularly how local government was trying to deal with the challenges that are currently faced.
We have deprived coastal communities in west Cumbria as well. With regard to the retention of full business rates, one of the areas that we get the most funding from is the nuclear industry, from which we retain 50% of business rates, but the proposal for new build is that the Government would take 100% of business rates. Will the Minister confirm that that will be looked at as part of the funding formula?
Obviously we are looking at the whole of the funding that comes from business rates. I hope that the hon. Lady will be supportive of the nuclear industry, because there seems to be some confusion about that. I hope that she will also support Trident, which is also an important part of industry in this country.
My hon. Friend the Member for Isle of Wight (Mr Turner) set out the challenges that the island faces. I thank him for bringing representatives of his council to see me last week.
The hon. Member for Croydon North (Mr Reed) set out a number of challenges that the Government face in this regard, but he did not say anything about the main reason we are in the position of having to make extremely difficult decisions—the deficit that his party left behind when last in government.
We have recognised the challenges faced in rural areas and agree with many of the points made today. We are committed to supporting our rural areas, even at this time when there are some differences in opinion about how that is achieved. We want to give rural areas as much power as possible to grow their local economies and support their communities. This is a time of big opportunity and expectation of reform in local government. I assure hon. Members that we are listening carefully as we prepare the final settlement and consider how the transition towards 100% business rates retention happens. As I say, we are in a period of consultation. We will add the representations made in this debate to that consultation. I encourage right hon. and hon. Members and their councils to make written representations by Friday. We are listening carefully to colleagues. I have listened carefully to what has been said in the House today, and we continue to listen carefully to our colleagues in local government.
This debate has been a breath of fresh air throughout which there have been tremendous contributions from Members across the House. I am delighted that thanks to the Backbench Business Committee we were able to have this discussion.
Throughout his career, the Minister has been thoughtful, listening and insightful—[Interruption] And eloquent—I thank the Whip, my hon. Friend the Member for Skipton and Ripon (Julian Smith). Prompted by him, I am sure that more kind blandishments can be sent the Minister’s way. I am grateful for the Minister’s response and for the fact that he and the Secretary of State have listened to us.
The Minister said that he would treat this debate as part of the consultation, which closes this Friday. I have two asks on that. First, he should speak to his ministerial predecessor, who is sitting next to him—my hon. Friend the Member for Great Yarmouth (Brandon Lewis). When he was Minister, we were not very happy that there was an equal imposition of reductions in central Government funding to every council when there was such a discrepancy between rural and urban areas. We wanted that gap reduced, and he said, “These are tough times and we have inherited a deficit—I’ve got to do something that’s manageable and realistic.” So there was an equal cut in local government grant—11% was being saved and it was done uniformly to everybody. Unfortunately, that will go out of the window in this year’s proposed settlement. Metropolitan areas will see a 19% reduction in central Government funding over this Parliament, yet rural areas will see a 30%-plus reduction.
That cannot be right, for all the reasons set out brilliantly, it has to be said, by Labour Members—not only the hon. Member for Workington (Sue Hayman) but the shadow Minister, who, I am delighted to say, recognised that rural areas are facing the greatest hit. Anyone who wants to can look at Hansard tomorrow and see the Labour spokesman saying that. It is a shame that he did not go further and say that he wants the gap to be closed. Then again, given the Corbynite north London elite who are gathering behind him, it is not surprising—[Interruption.]
I apologise, Mr Speaker. Anyone who introduces more schizophrenia to the Labour party deserves to be told off by you and others. It is a shame that the logic of the argument so brilliantly espoused by the shadow Minister did not lead to a Labour commitment to do the right thing and close the gap.
My first ask is that, if we are going to make savings—and we Conservative Members say that we do—let us do it equally everywhere, so that there is no discrepancy between urban and rural when there is already a big gap between the two. As we have established, people in country areas are older, poorer, pay higher council tax and receive fewer services. It has to be right to close the gap, and the way to do that is by delivering, in this Parliament, an increase of £130 million, not £65 million, in the rural services delivery grant.
I think I speak on behalf of Conservative colleagues when I say that, if there is equal pain for everybody and an increase of £130 million in the rural services delivery grant in this Parliament, we would be happy. Our council leaders would still have enormously tough jobs to do, but they would feel that we were all sharing the burden fairly. If the Minister can go to the Secretary of State and deliver that, he will be not only applauded by Conservative Members, but, perhaps more materially to him and his colleagues, supported in the Lobby when we vote on the issue next month.
Question put and agreed to.
That this House has considered local government funding for rural areas.