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Local Government Funding

Volume 605: debated on Wednesday 3 February 2016

[Philip Davies in the Chair]

I beg to move,

That the House has considered changes to the level of local government funding.

It is a pleasure to serve under your chairmanship, Mr Davies. I want to start by paying tribute to councils across the country that are doing amazing work in very difficult circumstances to get better results for their citizens and better value for taxpayers’ money. I am a long-standing champion of reforming public services, and over the last 12 months I have seen countless examples of innovative councils rethinking what they are doing by joining up local services, shifting the focus towards preventing problems in the first place and giving local people more say and control. But welcoming and supporting the excellent work that many local authorities are doing must not obscure the brutal reality that councils now face.

My own council has suffered grant cuts of 37% in real terms since 2010 and has had to make £100 million of annual savings. Over the next four years, Leicester City Council will have to find an additional £55 million of savings.

I thank my hon. Friend for securing this very important debate. In the light of the Prime Minister’s recent letter to Oxfordshire County Council, does she share my concern that the significance of the problem seemed to take him by surprise?

I indeed find it ironic at best that the Prime Minister is writing to complain to his own council about the cuts his Government are forcing it to make. Many councils, including mine, are considering making very difficult changes in future. Even if they do that, as my council is trying to, and use up virtually all their current reserves, they will not be able to fill the gap, and the impact on vital local services will be severe. This picture is being repeated up and down the country.

If the Minister does not believe me or thinks I am biased because I am a Labour MP, he should listen to the Conservative chair of the Local Government Association, Lord Porter. After the spending review, he said:

“Even if councils stopped filling in potholes, maintaining parks, closed all children’s centres, libraries, museums, leisure centres and turned off every street light they will not have saved enough money to plug the financial black hole they face by 2020.

These local services which people cherish will have to be drastically scaled back or lost altogether as councils are increasingly forced to do more with less and protect life and death services, such as caring for the elderly and protecting children, already buckling under growing demand…Local government has led the way at finding innovative ways to save money but after five years of doing so the majority of savings have already made.”

He finished by saying:

“Tragically, the Government looks set to miss a once in a generation opportunity to transform the way money is spent across the public sector and protect the services that bind communities together, improve people's quality of life and protect the most vulnerable.”

I agree.

I congratulate the hon. Lady on securing this debate. Does she agree that while the big political picture often passes people by, what does not pass them by is when front-line services, often delivered by their local council, are impinged upon and restricted, as they seem to be in her local area? That is when hard-core political issues affect ordinary local people and they complain bitterly to their elected representatives.

The hon. Gentleman is absolutely right.

This huge problem is clearest in the hugely important area of adult social care. Already under this Government, 400,000 fewer older and disabled people are receiving publicly funded social care. That is a fall of 25% at a time when our population is ageing. More than 1 million people who struggle with the very basics of daily living—getting up, washing, dressing, feeding and going to the toilet—now get no help at all from paid carers or their families. Last year, the Care Quality Commission found that one in five nursing homes does not have enough staff on duty to deliver good quality care.

The latest survey from LaingBuisson shows that, for the first time ever, more older people’s care beds closed than opened. Five of the largest care providers predict significant provider failure over the next 12 to 24 months. I want to issue a warning that another failure of a big care home provider could be on the cards. Three of the larger home care providers have already withdrawn, or signalled their intention to withdraw, from providing publicly funded care.

My hon. Friend is making a powerful case. Does she agree that if councils like mine in Birmingham or hers in Leicester followed the Chancellor’s advice and raised extra money through the precept for social care, they would still have the problem that the King’s Fund identified? If every council in the country did that every year for the next four years, we would still have a social care funding gap in excess of £3 billion.

My hon. Friend has hit the nail on the head. I will come to the social care precept. These problems will not go away. In fact, they will get far worse. Far from what the Government would like us to believe, there is a growing gap in funding for social care, which will have dire consequences for elderly and disabled people, their families and the NHS.

I thank the hon. Lady for bringing this debate forward. I remind her that in areas such as mine, which is run by her party in a devolved Administration, we are suffering great difficulties with local authority handouts. My local authority is suffering a 4.1% cut and delivering rural services exactly as she was describing. The cost of delivering those services to rural areas has doubled, if not trebled. That massive problem has been delivered by the hon. Lady’s Administration in my area.

I thank the hon. Gentleman for his intervention, but I know where I believe responsibility lies. It lies with the current Government. They say more money for social care will be provided, first, through the better care programme, although this money is not what it seems and is arriving far too late, when the sector is already in crisis. There will be no increase in better care programme money until 2017 and even then there will be only £105 million extra. The full additional £1.5 billion that the Government said social care is getting will not be available until 2020.

That will not all be new funding, because £800 million of it is supposed to come from savings in the new homes budget. Due to the way the money is distributed, a handful of councils will receive no additional better care programme cash and others will lose more in their new homes bonus than they gain. It is completely unclear whether the full £1.5 billion extra in the better care programme will still be allocated if the Government do not achieve the saving in the new homes bonus.

New powers to raise council tax by up to 2% to spend on social care—my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) referred to this—were announced in the spending review, but they will be nowhere near enough to fill the gap in social care funding.

I congratulate my hon. Friend on securing this debate. Having faced £156 million of cuts over the last five years, Southwark Council has to find £70 million in cuts over the next three years, and that is expected to include about £30 million in social care services. Is she aware that the social care precept will contribute only £1.7 million per year if Southwark Council chooses to implement it?

I thank my hon. Friend for his intervention. He is absolutely right, and I will say more about that in a moment. In Southwark Council, like mine, there is no way that the social care precept will fill the gap.

My hon. Friend is being generous in taking interventions and is making a brilliant speech. Does she share my concern not only about the funding shortfall, but about the gross unfairness of the 2% council tax precept? Areas such as Newcastle, with the greatest social care needs, also contain the people who are least able to pay that additional sum of money. Once again, the Government are hitting the most vulnerable the hardest.

My hon. Friend is absolutely right. Even with the social care precept, the King’s Fund says that the gap in the funding required for social care will be about £3.5 billion by the end of the Parliament once the costs of increasing the national minimum wage in the social care sector are taken into account. And as my hon. Friend says, the social care precept could actually end up disadvantaging deprived areas and further widening inequalities, because the councils with the greatest need for publicly funded social care tend to have the lowest tax bases.

Leicester City Council and, indeed, Southwark Council will be able to raise only about £6.50 per head of population from the 2% social care precept, whereas Richmond upon Thames will be able to raise almost £15 per head. How can that be fair when Leicester, Southwark and other councils like that have a greater need for publicly funded adult social care than better-off parts of the country? In total, Leicester faces increased costs for adult social care of £21 million by 2020, but according to the Institute for Fiscal Studies, which has modelled this—I would be happy to give this information to all hon. Members—the council will be able to raise only about £7.5 million. That is only one third of what is needed. Where will the extra money for vulnerable elderly and disabled people come from?

My hon. Friend is making an excellent case. Does she, like me, wonder how the Minister will square the fact that adult social care has lost £4.6 billion since 2010 with the fact that the £3.5 billion that is being talked about will come in at a maximum of £400 million a year, as she is so carefully pointing out, and the fact that the better care funding will be only £1.5 billion by 2019-20? What we have is a gap that is widening by £700 million a year and money that is so risky, back-loaded and late.

My hon. Friend is absolutely right. Once again, we see the difference in the funding deal that social care gets compared with the NHS, where the money is more front-loaded. The social care funding is back-loaded, and what are councils supposed to do in the meantime?

These cuts to services are morally reprehensible and economically illiterate. They will leave elderly and disabled people without the help that they need. They will push families to breaking point and force even more people to give up their work so that they can look after elderly or disabled relatives because they cannot get the support that they need. That will deprive the economy of their skills and increase the benefits bill, and all of that will pile further pressure on an already struggling NHS, which will cost the taxpayer more.

We now have the second highest ever number of delayed discharges from hospital since data were first collected. One third of those are due to a lack of social care. In the last year alone, there has been a staggering 65% increase in delayed discharges due to a lack of care in the home. That makes sense for no one. The Government must urgently rethink their immediate support for council care services in the upcoming Budget, to ensure that people get the support that they need, and they must grasp the nettle of the long-term reforms that we desperately need to truly join up the NHS and social care, so that we finally have a single budget for these local services that people depend on and we stop the farce of continuing to rob Peter to pay Paul, pushing the costs up for everyone.

The hon. Lady is making a passionate speech highlighting what she thinks the problem is. Will she enlighten us on what the solution is? Will the solution be more borrowing, or which other Departments will she take the money from?

If the hon. Gentleman had listened to what I said, he would know that the first point is that we are spending more money unnecessarily because we do not have a fully joined-up NHS and care system. We are spending more on elderly people ending up in hospital and getting stuck in hospital when they could be cared for at home. Also, we need a fairer funding formula. If the most disadvantaged communities, who most need publically funded care, do not get it, we will increase costs and demands because people will end up in the NHS. We need proper reforms of the system to get the best results for the people who use it and the best results for taxpayers’ money. My worry is that the Government are thinking, “The NHS and social care? Job done,” which is to be completely ignorant of the crisis that is unfolding and not take seriously the reforms that we need for the future.

I know that many hon. Members want to speak, so I will finish by asking the Minister some questions about the Government’s plans to change the way local councils are funded in the future and to give councils additional new responsibilities as a result. As a strong supporter of devolving more powers to local councils, I welcome the spending review announcement that councils will be allowed to keep 100% of their business rate growth by 2020. That will help to give councils some of the tools that they need to boost jobs, growth and investment and for which they have been arguing for many years. However, there is a real risk that that change, combined with the total abolition of grants, will exacerbate existing inequalities between different parts of the country and further harm deprived areas, which have already been hit hardest by the Government’s cuts. Once grants are abolished, how will the Government ensure a fair distribution of resources, especially when more deprived areas, with higher levels of need, may be less able to raise funds from business rates and council tax?

Can the Minister confirm that the additional responsibilities that the Government are considering giving councils by 2020 include funding all of public health services, attendance allowance and the administration of housing benefit? How will the Government ensure that future revenues from council tax and business rates keep pace with demand for the services for which councils already have responsibility, such as adult social care, and the new responsibilities that they may gain, such as attendance allowance, especially when our population is ageing?

The Government must work closely with local councils to provide proper answers to those questions and, crucially, to hardwire fairness into the system to ensure that the local services that my constituents and those of all hon. Members here today value and depend on continue to get the support that they need in the future.

Order. As everyone can see, there is heavy demand to speak in this debate. I do not like setting time limits, but to try to accommodate everyone fairly, I will have to impose a time limit of three minutes each.

It is always a pleasure to see you, with your acerbic wit, in the Chair, Mr Davies.

I thank the hon. Member for Leicester West (Liz Kendall). We all know that there is not enough money in the pot. I accept that cuts have to be made, but I want to make the case for fairer funding. I know how wasteful government can be, although generally, local government has delivered broadly the same service over the last five years despite having to face considerable cuts. I want to make the case for fairness between urban and rural government.

For my local district council, West Lindsey, Government -funded spending power—the overall funding available for local authority services—was £76 per head for 2015-16. The Government propose to cut that to just £52 for 2019-20. Many hon. Members here represent urban councils. Let us take Wolverhampton as an example. For 2015-16, Wolverhampton’s funding was £559 per head. It is being cut to £455 per head over the same period. That means that the people of Wolverhampton face a reduction of just 18.6%, while my constituents in West Lindsey will have to bear cuts of 31%.

The facts are just as bad at county level. The average amount awarded in Government grant per head across urban England is £486, while the grant per head in rural Lincolnshire is just £385. Metropolitan non-fire authorities face cuts of 19% over this five-year period, while shire counties, non-fire, are being saddled with an average of 34% cuts, and predominantly rural unitaries, non-fire, face cuts of 30%.

We have to face the fact that the sparsity allowance is totally inadequate. It does not even meet the higher operating costs of running essential services in rural areas. Urban residents are receiving a grant settlement from a Conservative Government that is about 50% higher than that received by rural residents. It is a double blow, as we in rural areas face higher council tax burdens, which have to be extracted from people who, on average, earn less than those in cities.

Does my hon. Friend share my concern that, despite the Government’s intention to narrow the gap between local government funding in rural and urban areas, the new formula seems to widen the gap and make the matter even worse?

Yes, it widens the gap. We are asking the Minister not for more money but for fairer funding between rural and urban areas, which is precisely the point that my hon. Friend makes.

I have worked alongside Lincolnshire County Council and West Lindsey District Council for decades, and they are not spendthrifts. They count every penny, but they are being penalised for having saved so much in the past. They know the needs of our people far more than anyone in Whitehall does. We have already given up much of our invaluable network of local libraries, and got rid of our magistrates courts and our police stations. Are we going to get rid of our fire stations now? How much more does Whitehall really expect that rural England can take?

Closing the gap between the Government grant to the urban dweller and to the rural inhabitant by just 5% over five years would make a huge difference to service provision in rural areas. In Lincolnshire, it would mean an extra £13,130,000 per annum at the end of a five-year period. Right now, good, hard-working people in rural areas are subsidising much better provision of services to people in urban areas, and that has to change.

Does the hon. Gentleman think it is a good idea to keep robbing Peter to pay Paul, as my hon. Friend the Member for Leicester West (Liz Kendall) said in her speech? As she laid out so well, adult social care has been cut by 31% across the urban councils that the hon. Gentleman is talking about. It is really necessary to cut funding for those councils more to bring fairness to the councils he is talking about?

Obviously that is the argument that those representing urban areas will make. I do not deny that the Minister has a delicate balancing act to make, but let right be done. Let there be justice. How can we have such an extraordinary discrepancy? People think of rural areas as fundamentally prosperous. I represent Gainsborough, a small industrial town, and the south-west ward of Gainsborough is one of the most deprived wards in the entire country under any measure.

No, I must finish now. Rural areas nowadays are not like some Gainsborough or Constable painting. There are real areas of deprivation, and we ask for justice. We know that it is not practical to have absolute parity per head across the country, but it is totally unacceptable that, in a time of tightening, we are not bearing the burden equally. Are we not one nation? The settlement is totally unfair to the rural taxpayer and our rural authorities. It must be revisited.

It is a pleasure to serve under your chairmanship, Mr Davies.

I will raise just a few of the significant concerns that Cumbria County Council has spoken to me about regarding the provisional local government finance settlement. I am sure that everyone is aware that Cumbria suffered very badly in the flooding before Christmas, but what people perhaps do not realise is that it is ongoing. Another bridge collapsed last week. Our problems are not over. The amount of money with which the Government propose to support us is so woefully inadequate that it will add to the difficulties we have with the settlement.

I will speak about rurality and the fact that we have a super-ageing population. Rural residents on the whole—certainly in west Cumbria—earn less than their urban counterparts, yet they pay more in council tax, get less in Government grants and receive poorer and fewer services, which often cost residents to access them because they might have to move. It is not a fair system.

Although I have some sympathy with the argument regarding the rural and urban comparison, surely this is not a matter of rural versus urban. This is a matter of some of the most deprived authorities, whether they are rural or urban, being hit the hardest. My district of Bradford will face up to £260 million of cuts by 2018. Does my hon. Friend agree that the most deprived authorities, regardless of whether they are rural or urban, are the worst hit, and that that will increase inequality and deprivation and decrease opportunities?

The fundamental point of argument, which I will come to, is about the way that funding is decided on need. That relates to what my hon. Friend says.

Cumbria has one of the fastest-growing populations of older people in the whole country, which will put extra pressure on the council in the future. This is about not just the funding formula now but the proposals for future years, and that is not taken into account.

The timing of the announcement and the consultation process is important, but it often gets glossed over. The announcement of the provisional settlement came very late in the year, more than three weeks after the autumn statement and the announcement of the spending review. Inevitably, that resulted in a short consultation period, which happened over Christmas. I understand that that was done to keep to the timetable for the announcement, but it is not helpful when councils are trying to manage their budgets and prepare for the future. There were significant changes, which should have meant a proper consultation, as Government guidance states that “12 weeks or more” is appropriate when significant changes are being made. The consultation fell well short of that. I urge the Minister to look at how we can improve consultations and their timings.

On the proposed approach to allocating the funding, I appreciate what my hon. Friend the Member for Leicester West (Liz Kendall) said, but the methodology does result in rural areas losing a significant amount of funding.

As the hon. Lady may know, I represent a constituency in Cornwall that faces many of the same challenges as her constituency. Does she agree that part of the problem—this is not a party political point, because this has been true under successive Governments —is that deprivation is not measured in the same way in rural areas as it is in urban areas? It is often hidden, but it is just as much of a real issue.

The hon. Gentleman makes an extremely pertinent point. People who live in rural areas often have very low expectations of the level of service they should receive, so they often put up with receiving an awful lot less. That is not sufficiently taken into account.

I will briefly touch on the topic of social care, about which my hon. Friend the Member for Leicester West made some powerful points. My understanding was that the Government’s stated desire—the Minister may put me right on this—is for greater protection for councils that provide adult social care. Therefore, it does not make sense to me that that money is diverted away from the county areas, such as Cumbria, that have a larger proportion of ageing people and a faster-growing elderly population. It has a profoundly negative impact on the stability of an already very fragile care market, and will have a knock-on effect for the wider health sector.

The distribution of funds for councils should take into account not only resources but needs. The proposals do not reflect that, and it is important to address that for the future. If we do not reflect need, where are we going, particularly with regard to social care? Cumbria County Council struggles to deliver social care and mental health services. To come back to my first point, social care and mental health care will be under increased pressure because of the impact of the floods. I urge the Minister to consider how he can support us in those areas.

It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on securing this important debate. She and I serve together on the Select Committee on Communities and Local Government, and we have received deeply worrying briefings of late on the future of local government finance, some of which I will touch on.

It is right, as a principle, to offer councils a four-year funding settlement to help them plan for the future. I welcome the Government’s initiative. However, when councils simultaneously face rumours about huge new services, such as the attendance allowance or public health, for which they may be expected to take responsibility over the same timeline, they are left with no security in their financial planning. I speak to council finance directors who are struggling to understand what will be expected of them over the next four to 10 years, which means it is incredibly difficult to plan.

The reality is that many councils have very little room left for long-term financial planning. My council tells me that it is firefighting from budget to budget without long-term certainty, and that it will be 2.5% worse off in 2020 than today, compared with national average cuts of about 0.5%. That figure does not seem very big, but it is about the size of the entire libraries budget, and let us not forget that it comes on top of incredibly severe cuts over the past four years that mean that Kirklees Council will be spending about 15% less than it spent in 2010.

I do not believe that anyone becomes a councillor to cut local library services by 32%, to cut children’s music services by 94%, to remove £700,000 from the budget to cut grass or to completely scrap community events and festivals, which is what is happening in Kirklees. Many of my constituents are feeling the even sharper end of council cuts to adult social care and other important services. My fear is that the Government want to blame local councillors.

I am struck by the fact that families living in a £70,000 terraced house in Batley in my constituency will now be getting £60 less per family member in council services than they did in 2010, but families living in a £2 million home in Oxfordshire will be getting £50 more per family member. That seems blatantly unfair, and my constituents struggle to understand it. That disparity in core spending power over the course of this Parliament is staggering and seems to be growing. For councillors such as mine in Kirklees, it does not feel like we are all in this together.

I welcome the intent behind the proposed business rate growth retention, but the Government’s announcement leaves many unanswered questions. In Kirklees Council, the potential funding gap—

It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on securing this debate. There can be no doubt that local government has been hit harder than almost any other area of the public sector over the past six years of the Government’s austerity programme. Among local authorities, councils with the most deprived populations have been hit the hardest of all. I represent part of Lambeth and part of Southwark. For simplicity, I will talk about Lambeth today, but exactly the same picture is played out across the border in Southwark.

Lambeth Council is the 29th most deprived area of England, and it has experienced the 13th highest level of cuts to date, with tens of millions of pounds of cuts still to come. Councils have been through six rounds of efficiency savings, and Lambeth has consolidated the number of core office buildings from 14 to two, reduced the number of staff by 1,000, cracked down on fraud to raise an additional £3.6 million and innovated to deliver more services online and share services with neighbouring boroughs, but it has lost more than 56% of its Government funding since 2010. Despite efficiency savings and innovation, cuts of that scale mean that the council still faces further impossibly difficult choices.

As the Prime Minister is aware, cuts to front-line services are hard to bear. Councils are increasingly forced to make a kind of Hobson’s choice between: the essential statutory services upon which our most vulnerable residents rely, such as the safeguarding of children and social care for older residents; the services that bind us all together, such as libraries, parks and street cleaning; and the services that help us build for the future, such as planning and school places.

The Government have taken a system designed to allocate resources to councils on the basis of need and turned it on its head, so that the councils with the greatest needs are dealt the greatest cuts. While the Government have cut, needs have continued to grow. The Government’s disastrous approach to housing has resulted in a dramatic increase in families presenting as homeless and needing temporary accommodation. Lambeth’s expenditure on temporary accommodation has increased from £2 million in 2011 to £11 million last year, and an ageing population means that the need for social care continues to grow.

By 2020, councils will receive no revenue support grant from the Government and will be funded entirely from council tax and business rates, with 55% of funding coming from business rates. That is a fundamental shift from a system of local funding based on allocation according to need to a system that will benefit councils with strong council tax raising abilities, a large business sector and the capacity for economic growth. Although there will undoubtedly be some winners in that system, there could potentially be some very big losers. There are big questions about how the Government will redistribute funding to councils with significant need to ensure that those with limited capacity to raise additional business rates do not face unacceptable consequences.

There is limited time today, and I will finish on time, but I hope that the Minister will answer some of those big questions about the mechanism for redistribution, and about the better care fund and how it will be distributed across the country. Without those clarifications, this major reform of council funding is a big leap into the unknown, fraught with risk.

It is a pleasure to serve under your chairmanship, Mr Davies. I pay tribute to my hon. Friend the Member for Leicester West (Liz Kendall) both for securing this debate and for her excellent contribution. Birmingham is the city of Chamberlain, the workshop of the world, the birthplace of municipal governance and municipal enterprise, and the biggest council in Europe. It is an ambitious city with immense potential, but it is also a city of high need. The constituency that I am proud to represent, Erdington, may be rich in talent but it is one of the poorest in the country.

Birmingham is suffering from the biggest cuts in local government history. Some £567 million has gone already, and £258 million will go over the next four years—£90 million will go this year. More than half of Birmingham’s spending power has gone, with serious consequences for a caring city struggling now to care. I was at the Royal Orthopaedic hospital last Friday and was told about its desperate difficulties in discharging patients into the community precisely because there are no people there to care for them.

School crossing patrols have been put at risk; home starts supporting vulnerable families, likewise. It is not just the council but our police service and our fire service that have suffered enormous cuts and been treated unfairly. A grotesque unfairness of approach has been common throughout. In relation to the police, for example, Surrey has been treated twice as favourably as the west midlands. The National Audit Office has frequently criticised the Government’s approach to the council, and the provisional settlement this year sees Birmingham’s spending going down by £100 per household, which is much more than the average—in Oxfordshire, after the intervention of the champion of Chipping Norton, the figure is but £37.

That is why all the parties have come together in our city. In the words of the Birmingham Mail, which has been championing the campaign for a fair deal, “No More #Brumcuts”. This is a well-timed debate because the local government and police settlements will be announced next week. Birmingham MPs of all political parties recently met the Secretary of State for Communities and Local Government and made the kind of case that my hon. Friend the Member for Leicester West made for a fairness of approach. We argued that we need a more sensible, longer-term approach. Of course it is about quantity, but it must also be based on need, and not pretending that the social care precept will address the problems of the mounting costs of social care. We also made the case that if fairness is acted upon now, it would see our city £85 million better off.

Does my hon. Friend agree that it would be helpful to hear today that, where councils and NHS providers are willing to propose innovative ideas to try to address some of the social care problems, the Government will put up some extra funding now to make that a possibility?

My hon. Friend makes a powerful point. When we met the Secretary of State for Communities and Local Government to discuss the immediate problems, we also discussed the wider and longer-term problems. My hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe), my right hon. Friend the Member for Birmingham, Edgbaston (Ms Stuart) and the right hon. Member for Sutton Coldfield (Mr Mitchell) will be working together at the next stage on a sensible integration of health and social care, which we badly need nationwide, and particularly in our city. We want to make progress, but it will take time because we are confronted by an immense task.

There are big wider and longer-term problems, but here and now the plea from Birmingham is simply for a fair approach. If Birmingham is treated fairly, it will suffer but £5 million cuts this year, as opposed to £90 million cuts. If Birmingham is treated unfairly—I say this with all earnestness—children going to school will be put at risk, vulnerable families will be let down, and those badly in need of care, likewise. Those who wish to come out of hospital to rejoin their loved ones at home will be stuck in hospital. I therefore urge the Government to listen to the case for the fair treatment of our city.

It is a pleasure to serve under your chairmanship, Mr Davies.

I congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on securing this important debate and I start by paying tribute to Liverpool City Council, the councillors and, in particular, the elected Mayor of Liverpool, Joe Anderson, who have provided outstanding leadership over what has been a very difficult period—almost six years—since they took office.

Liverpool faces funding cuts from central Government of 58% and the first response of Joe Anderson’s administration has been to seek efficiency savings. Another response has been to find innovative solutions to problems. For example, the council is undertaking very significant community asset transfers to ensure that savings can be made and services protected.

Liverpool City Council is working with the other Merseyside councils and it has been determined to achieve serious devolution through the agreement that was reached for Liverpool city region devolution. It is not a council that is turning its back on efficiency, innovation or reform. Far from it—Liverpool wants to achieve all those things—but even with efficiencies and measures such as community asset transfers we are left with a massive gap, and it is a very similar story to the one that my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) has just told with regard to Birmingham.

Like Liverpool, many councils in that situation are looking, first, towards making efficiency savings and, secondly, towards innovative ideas. However, those things only go a certain way and then something must give. Most of those councils are now in that place where front-line services—libraries, cleaning services and all those important community services—are on the verge of closure. Once again, does my hon. Friend agree that this situation will have the biggest negative effect on those people who are already living in deprivation and poverty?

I thank my hon. Friend, who has anticipated the next part of my speech, because his argument is exactly the one that I want to make, and that a number of our hon. Friends have already made. It is precisely the poorest areas of the country that are being hit hardest by the scale of the cuts in local government spending that we are witnessing. Efficiencies take us so far, and innovation can save money and sometimes improve services, but we are still left with a very wide gap.

My hon. Friend the Member for Leicester West spoke about the challenges in social care. Liverpool City Council, like other local councils, has been allowed to increase the council tax for the coming year to pay for social care. That will raise about £2.5 million, which is a fraction of the money that Liverpool will need to plug the gap in social care.

One of the biggest challenges facing us is how to ensure that those who most need support in social care are getting the support they deserve. As my hon. Friend the Member for Leicester West said, the saving in council money is not necessarily a saving in overall public spending, because a lot of those resources then have to be spent by the NHS in treating people who might otherwise be out receiving social care.

Therefore, when the Minister responds to the debate, my plea to him is to understand why it is that in some of the most deprived parts of the country, such as Liverpool, there is so much anger about the scale of the cuts that are being faced. Liverpool has said, and I believe is saying this genuinely, that it will struggle to meet its statutory responsibilities as a local authority if cuts on the scale being proposed go ahead. Liverpool has had a 58% cut in central Government funding since 2010, which is simply not sustainable. I urge the Minister—working, of course, within the constraints that his Department is operating under—to look again, especially at those authorities that are facing the largest scale of cuts.

I welcome the fact that my hon. Friend the Member for Leicester West has given us this opportunity today to air these important issues.

It is a pleasure to serve under your chairmanship, Mr Davies, and I thank the hon. Member for Leicester West (Liz Kendall) for securing what is a very important debate.

Under this Government and the previous one, local authorities have faced enormous cuts to their budgets while receiving an ever-increasing workload. Rather than power, the only thing that seems to have been devolved is austerity. The Chancellor’s spending review and the recent local government settlement were further blows for Rochdale.

During the last Parliament, Rochdale was hammered. The council was forced to cut more than £200 million from local services, which was almost half the available budget. The council leader, Richard Farnell, has been preparing for a £40 million cut over the next two years, but he will now have to plan for a further 4.5% cut to spending powers after the local government settlement, when the average cut across England was only 2.8%.

I am grateful to my borough neighbour for giving way. Like others, he has made an important point about the unfairness of the cuts. To illustrate that unfairness, if Manchester had had a fair share of cuts over the course of the last Parliament—not being protected from cuts but just suffering our fair share of them—we would be £1.4 million a week better off. Surely that is unfair to the really deprived boroughs in this country.

The hon. Gentleman makes an important point about the unfair way that these cuts have been spread across the country.

Services in Rochdale have already been stripped back to the bare bones. For example, £8 out of every £10 in Rochdale is spent on children, the elderly and the disabled. The cuts to our budget will have a devastating impact on the most vulnerable people in our town.

I do not say this lightly, but Rochdale is one of the most deprived communities in the United Kingdom. Unemployment is higher than the national average; people in the town are earning £635 less per year than they were in 2010; and on top of that, under this Government we have to accommodate more than 1,000 asylum seekers every year.

Rochdale has repeatedly been one of the three councils in the country that have been hardest-hit by successive cuts under this Government. There are proposals to cut the public health grant, despite the grant providing vital support for preventive services around drugs and alcohol, and for community health improvement. We are struggling with these issues in Rochdale, and such a cut would be devastating.

As has already been mentioned, measures in relation to the social care precept are welcome. I welcome the concept but there is an added problem, because these measures are just scraping the surface in terms of the problems facing local government. The measures will disproportionately benefit wealthy areas, not least because most of Rochdale’s housing is in council tax bands A and B, which means it only raises £1.3 million for the local authority. That money will go nowhere in terms of meeting the demand for social care. It will not even meet the increases to the minimum wage for workers in care homes; that is how inadequate the policy is.

Let me briefly turn to the point about the 100% retention of business rates, which gives Rochdale a similar problem to the one I have just described. We do not have the ability to generate the same level of resources locally for the services the area requires compared with councils with a higher tax base.

I will finish by saying that if we truly want to empower our local communities, we need to fund them properly. A one-size-fits-all policy will not deal with the issues that we need to tackle: health, education, jobs and local regeneration. Rochdale needs and deserves a better funding regime than this Government are currently creating.

It is a pleasure to serve under your chairmanship, Mr Davies, and I congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on securing this really important debate on local government funding.

It is clear that Government cuts to local authorities have impacted on the authorities’ ability to deliver services. That is certainly true in Coventry, where Government cuts are hollowing out our local communities. Since 2010, Coventry City Council has lost £94 million from its budget and by 2020 its Government grant will have been cut by a massive 65%. As a result, the council is being forced to consider proposals that will further reduce its ability to deliver the services that my constituents deserve and depend upon.

Coventry City Council has rightly prioritised the needs of vulnerable people, and despite the pressure on its budgets the council has found more than £10 million to invest in children’s services, to help to turn around a service that is overwhelmed by children who need support from the social care system.

Like many other local authorities, however, Coventry City Council is also seeing a significant rise in the number of elderly residents requiring support from adult social care. While I recognise that the Government have permitted local authorities to add a further 2% to council tax as part of the adult social care precept, that simply does not go far enough. Social care budgets are facing a perfect storm of rising demand and rising cost, but funding is not increasing far enough to cover that.

No, I will not. I am going to finish in a bit, as I only have a minute. In Coventry this year, adult social care budgets are predicted to have been overspent by £6.7 million, but the social care precept will add only £2 million. That leaves a massive gap that the council will need to cover by reducing spending elsewhere, and it is to that expenditure that I now turn.

Many have spoken about the “graphs of doom” that show local authorities ceasing to be able to provide anything other than the most basic of statutory services and social care. Those predictions are becoming a reality in Coventry. The council has made a frank assessment that in future it will be unable to fund, among other things, libraries, community centres, voluntary agencies and road repairs to the same level that it has in the past. That means that the colour and lifeblood of our communities will begin to dwindle as support that they once received from the council is no longer there. If the Government want to help people escape poverty, tackle poor levels of productivity and deal with the long-term problems associated with worklessness, they must provide local government with the resources it needs to let our communities grow and flourish.

It is a pleasure to serve under your chairmanship, Mr Davies. I first commend my hon. Friend the Member for Leicester West (Liz Kendall) for the clear way in which she set out the issues, in particular the impossibility of councils’ social care obligations being met. For all the talk of devolution, the reality is that the Government have shown contempt for local democracy. They are devolving not only power, but cuts, risk and blame. Worst of all, they do so in the most cynical and Machiavellian way, using sleight of hand at every opportunity. Indeed, they have got so good at spinning on these issues that they have even managed to fool the Prime Minister, as my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) pointed out earlier.

One consistent concern that I have heard from local government is about how the Government keep moving the goalposts. The most recent autumn statement contained a total of 10 changes that have left my council, Cheshire West and Chester, £8.4 million worse off. That is on top of a funding formula error that means the council will receive £2.3 million less than previously indicated. Overall, the council will lose £90 million of central Government grant over 10 years, and in-year cuts such as those to public health not only make planning difficult, but will cost us all more in the long term.

There is widespread agreement that devolution is a good thing, but I do not believe the Government are so good at putting it into practice. True devolution means central Government trusting local government. An example of where they have not done that is the proposal to deny councils the new homes bonus where planning permission has been granted on appeal. That is a blatant attack on local democracy. It seems we have a transfer of responsibility, but not a genuine transfer of power.

The council tax reduction scheme is a classic example of the Government passing on a cut locally, but dressing it up as a new power to be enjoyed by local government. It is an invidious choice for councils: do they cut local services or take money off some of the poorest people in their communities? Another example is the Housing and Planning Bill, which proposes an annual raid on council housing revenue accounts. The retention of business rates is in principle a welcome measure, but in its current form it passes on risk and uncertainty while failing to pass on the power and flexibility to allow councils to grow their local economies.

There has to be greater consistency in the powers given, so that it does not look like local government is just getting the difficult decisions that central Government want to swerve. The Communities and Local Government Committee has just published a report on devolution, and I want to draw attention to one comment in it:

“We also believe that the Government’s approach to devolution in practice has lacked rigour as to process: there are no clear, measurable objectives for devolution, the timetable is rushed and efforts are not being made to inject openness or transparency into the deal negotiations.”

I hope the Government will take heed of those comments, as they not only apply to devolution, but rather neatly sum up many of my criticisms of how the council funding regime operates. Local government is full of great innovators, and they should be given respect, true freedom and fair funding.

I, too, congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on the clarity with which she presented her case and the characteristic forcefulness of her argument.

I mainly want to say a few words about Knowsley Council and how it is affected by the settlement, but before I do that, it is worth looking at the context of the past 10 years. My hon. Friend the Member for Liverpool, West Derby (Stephen Twigg) referred to our city region. Over the past 10 years, the support to local authorities in the Liverpool city region has been cut by a staggering £800 million. In Knowsley, that has meant a cut of £90 million, which I calculate to be £1,500 a household. He rightly mentioned devolution, which the local authorities and he and I welcome, but any pretence that it will resolve the problems we are confronting with funding for local government is fraudulent, because all it brings with it is £30 million a year in extra funding for infrastructure problems, and it will not resolve any of the issues that concern us in some of the most deprived parts of the country.

The hon. Member for Gainsborough (Sir Edward Leigh) talked about the difficulties that his local authority is experiencing. I have every sympathy with him, but his area has not been subject to the reductions in grants and support over the past 10 years that areas such as Knowsley, Liverpool, Manchester and Birmingham have. He sets up a slightly false dichotomy between rural and urban areas. The dichotomy is between the areas with the greatest need and those with less need.

I want to say a few words about some of the issues that the Minister might mention when he comes to reply. We welcome the additional 2% flexibility on social care, but in Knowsley’s case that produces only £550,000 a year, when we face pressures of £3 million a year. There will be a massive reduction in the resources available. With the new homes bonus mechanism, for every pound that is withheld, we only get 38p back, so that is not much of a help. Finally, we do not even know what the figures on public health are at the moment, but it is likely that there will be a reduction there, too, and that is disgraceful.

It is a pleasure to serve under your chairmanship, Mr Davies. I, too, congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on securing a debate that is close to my heart. I was a councillor before I entered Parliament, and I saw at first hand the effects of the Government’s policies because I was in charge of a £22 million budget. The Chancellor will often talk about making tough decisions to secure economic stability, but when it comes to direct attacks, such as cuts to tax credits or police budgets, the Government make embarrassing U-turns. However, when it comes to cuts to local government, they persist, because they can shove the blame on to local councillors and local councils, who then have to face angry residents.

When I was on Camden Council, we were told to find £80 million of cuts between 2010 and 2014. That level of cuts cannot be found just through efficiencies and cutting the fat and discretionary services. We had to cut front-line services. Consider this: by 2018, Camden Council will receive half of what it receives from central Government. In a few years’ time, the council will have to have cut £180 million from its budget. That represents one year’s spending on adult social care—including mental health services—at £99 million, homelessness support at £33 million and waste services at £36 million.

Parts of Brent are in my constituency, and that borough has had an £80 million shortfall. It will face further cuts of 25% over the next three years, and it is considered to be one of the four most vulnerable boroughs in London. It ranks in the top 10% of vulnerable boroughs in the country. Some 31% of children in the borough live in families that are dependent on tax credits. One third of residents live on salaries below the London living wage, because of our low-wage economy.

My hon. Friend mentions the difficulties and cuts in social care services. Has she seen in her local NHS the problems of more elderly people going into hospital and the delayed discharges from hospital, which, as I have argued before, cost the taxpayer more?

I thank my hon. Friend for her intervention. Yes, I have seen real-life examples of the situations she describes. We could focus on many vulnerable groups, but I particularly want to mention people with mental health problems. The Prime Minister has said over and over that we should have a frank discussion about people with mental health problems and not talk about them in hushed tones or whisper around the topic. Well, let me tell the House: people with health problems are the ones who are shouting the loudest, because local services are a lifeline for people with mental health problems. One constituent of mine tells me that the day centre she relies on—which helps her to handle her mental health problems and helps her with independent living and support—will not be there any more because it will be receiving £100,000 of cuts in the next few years.

We cannot talk about fixing the roof when the sun is shining if we crush the roots of local democracy, which is what is happening by disfranchising people and taking away the services they rely on. I urge the Minister to think carefully about how local councils are struggling and suffering as their budgets are hit over and over by national Government. If we have to make tough decisions, we have to take it on the chin in national Government and not simply push the blame on to local councillors and councils that are dependent on handouts from national Government.

It is a pleasure to serve under your chairmanship, Mr Davies. I wish to congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on securing this debate on the far-reaching, deep and savage cuts to local government funding.

My involvement with local government goes back many years. I was elected to Liverpool City Council in 1973 and remained there until 2000. I had a front-row seat during the Thatcher years, witnessing the devastating effects of a Government determined to bring local government to its knees. Today, sadly, I see that happening all over again, but I fear it will be even worse this time. The Government are pushing local authorities to the financial brink, to the limits of their organisational capacity, and pushing even statutory services to the point of collapse. The Government explain the need for cuts and assure us that front-line services should not be affected. We have heard it on the NHS and policing time and again, but the reality is very different.

Lancashire County Council had projected to make £65 million in budget reductions this year, with a £263 million funding gap by 2020. The Government formula, imposed without consultation or any transitional arrangements, means that the council is required to make £76 million in savings, and by 2020 will face a £303 million gap. Those are staggering sums of money, but it is often difficult to know what it really means. Besides cuts in social services, in West Lancashire there is a long list. Vital bus services, such as the 3A and 5, are facing the axe. Schoolchildren and people wanting to go to the doctor’s, the hospital or social events are being abandoned. Eroding the principle and availability of public transport has a direct financial and sometimes personal cost. There is an irony in offering people a bus pass when there are no buses to use them on. It is like giving people a free TV licence and confiscating the TV. Public transport is an absolute lifeline.

The Government talk about choice in education, but there is no choice if people cannot get a bus there. In West Lancashire, the Environment Agency’s budget has been cut, and now there is talk of turning off pumps, which will mean that the area is flooded even more. We have been subject to the most savage and awful flooding in recent weeks.

I do not think it is dramatic to say we are facing a crisis in local government. The Government need to make the right decisions—fair decisions—and they cannot stand by, tie the hands and feet of local government, kick them into the river and stand back and say, “Look, they can’t swim.” Now it is clear that the Conservatives know the cost of everything and the value of nothing.

As my hon. Friend the Member for Leicester West (Liz Kendall) has mentioned, areas of deprivation have suffered more in cuts to council funding than more prosperous areas. Inner London boroughs, metropolitan areas and councils in the north have seen disproportionately harsh cuts. Hartlepool Borough Council’s grant has been reduced by 40% since 2010, and, as per the 2010 index of multiple deprivation, Hartlepool is the 24th most deprived local authority out of 354 areas in Britain. I see the consequences of austerity and deprivation every day.

For Hartlepool Borough Council’s budget over the five years to 2015-16, there has been a cut in spending power of £313 per person, the highest of any local authority in the north-east, which is itself the region with the highest cuts to council funding. In December, it was announced that the local authority would lose a further £2.1 million in Government grant in 2016-17, on top of an anticipated £2.8 million. How does the Minister think that areas such as Hartlepool can have such levels of unfair cuts? Why has he moved the funding formula away from a needs-based approach for the provision of local government services?

My second point relates to business rates and the unusual, if not unique, position of Hartlepool and the nuclear power station. Hartlepool is the second smallest unitary authority in the country, although there is nothing wrong with being small. About £33 million comes from council tax generated locally. Business rates are a bigger provider of local government finance, with a total rateable value of nearly £100 million. The nuclear power station in my constituency provides about a third of that entire business rate income, at just over £33 million. So the business rates bill equates almost identically to the council tax revenue.

The unique position of Hartlepool is two-fold. First, there is nowhere else in the country that has such a large payer of business rates proportionate to the rest of the business rate base. Secondly, the nuclear power station has often quick and unexpected shutdowns for health and safety purposes, with a consequent loss of business rates that cannot be collected, and the council has no ability to manage or plan for that. In addition, there has been a revised valuation of business rates, which means that the power station pays less—£3.9 million this year and every year in perpetuity. To put that in context, to make up this shortfall of income, there would need to be an increase in council tax of about 11%, or the construction of 2,700 properties paying band D council tax: the equivalent of increasing the size of the town by 12%. That is simply not going to happen.

The Secretary of State was kind enough to meet with me, the leader and the chief executive of Hartlepool Borough Council to discuss this matter. Will the Minister continue to look at this so that Hartlepool residents do not suffer?

Just to confirm, the Front-Bench spokesmen are not subject to the same time limits, but I want to get to the Minister before 10 minutes to 4, to give him time to answer the points raised and also for the hon. Member for Leicester West to briefly sum up.

It is a pleasure to serve under your chairmanship, Mr Davies. I thank the hon. Member for Leicester West (Liz Kendall) and my colleagues from the Communities and Local Government Committee for their contributions this afternoon. It seems absolutely clear that there is a serious crisis in local government in England in terms of funding and the resources allocated according to the funding formulas that are in place. I cannot say that I am greatly familiar with how the funding formulas operate in England, but it seems clear that, regardless of which part of the country Members come from, there seems to be a sense that the funding formula does not work.

The hon. Member for Gainsborough (Sir Edward Leigh) made clear his concerns about the funding formula, and the hon. Member for Birmingham, Erdington (Jack Dromey) and Members from other places, both urban and rural, raised concerns about how it works for them. The Minister really ought to look more closely at the formula to see whether there is another mechanism that could be used, because there clearly is a problem.

The disproportionate level of cuts that local councils face in England is stark. We are having a debate in Scotland about local government funding, and we have been able to protect it in Scotland to a far greater extent than has been possible here. What is happening here is a choice. The Government have chosen austerity and they are passing the blame for austerity on to local government, which is completely unfair and unjust. That really should be looked at again.

The hon. Member for Ellesmere Port and Neston (Justin Madders) talked about cuts being passed on in the guise of powers. That is true and really quite stark. It is a very sleekit way for the Government to duck their responsibilities and pass on cuts. It is really unfair for them to pass on the social care precept as a tax rise for local government to carry out.

The hon. Member for Hampstead and Kilburn (Tulip Siddiq) spoke movingly about vulnerable people and areas of deprivation. People are already suffering great injustices and there are great societal imbalances in how people live that are now being compounded. I very much agree with what the hon. Member for West Lancashire (Rosie Cooper) said about the Thatcher years, when councils were brought to the brink. We are coming round to that again. In parts of Scotland, particularly parts of Glasgow, we are still living with the social impact of those cuts, and that will be true for constituencies throughout the country. Many families have already lived through that. We do not want to see it again if it is in any way avoidable, because it seems completely unfair.

With some exceptions, such as the hon. Member for Gainsborough, there are relatively few Tories present. The House of Commons Library debate pack provides some evidence that Conservative MPs and councillors throughout the country have concerns about these matters, so it is a shame that that was not reflected in the balance of the debate.

I do not want to take up much more time because I know that Members will want to the Minister’s response.

This is the first time I have attended a debate for which you have been in the Chair, Mr Davies, and we have known each other a long time. I thank the hon. Lady for giving way. I want to give her an idea of what is happening in places such as Coventry, which by the end of the decade will have lost something like 60% of its budget to cuts. Over the next three years it has to find about £28 million. That is a hefty sum in anyone’s language. She made a telling point in her opening remarks: we have to remember that the Conservatives always pick up from where they left off the last time they were in government. If people do not see that, they must be blind.

The hon. Gentleman is absolutely correct. The Government are making a choice. I hope that councils throughout the country will challenge them very strongly on this. The Communities and Local Government Committee hears concerns from across the country about the range of policies that are coming and the funding gaps that are emerging. We have to be extremely careful, because it will be our constituents who come back to us and say, “What’s happened to the service provision in my area?” It is this House and the Government’s austerity obsession that are causing all these problems locally. We need to challenge that wherever we can.

It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate my hon. Friend the Member for Leicester West (Liz Kendall) on securing this important debate and thank the many Members who have turned up to take part.

I really hope that the Minister is in listening mode today, because my goodness, he has had a powerful lesson in the impact of his decisions on communities right across the country. I predict that when he responds he will claim that he and the Government have protected local government funding, but they have not. In fact, they have cut £1 in every £3 available to councils as the settlement funding assessment falls by 34%. They have cut some NHS budgets, handed them over to local government to take the blame and included that figure in the core spending power so that it does not look like spending has fallen by so much overall.

To partly fill the gap, the Government’s funding assumptions expect councils to increase council tax by 1.7% a year, every year, and on top of that impose a 2% social care precept. That still leaves a giant £1 billion social care funding gap, which will hit the poorest communities in the country the hardest. All that adds up to a 20% council tax rise over four years—a council tax rise that was designed in Downing Street. The scale of the Government cuts that are being imposed means that council tax payers will be forced to pay more while getting less.

Would my hon. Friend be surprised to learn that the Conservative party’s manifesto for last year’s general election promised to keep council tax rises to a very low minimum?

Given the rest of what the Government are up to, I am not surprised at all, but I share my hon. Friend’s disappointment.

As we have heard this afternoon, local government funding under this Government is deeply unfair. That is illustrated by the fact that the 10 most deprived councils in England have been hit by cuts that are 18 times higher than those for the 10 least deprived councils. Research by the Joseph Rowntree Foundation found that during the last Parliament, social care spending fell by £65 per person in the most deprived areas. We have more frail and older people in need of care, but less and less money to pay for the services they need.

Even the Tory-led Local Government Association has warned that after the local government settlement, social care will still face a giant £l billion funding black hole by 2020. That can mean one of only two things: either more older and disabled people will be denied the vital services that they need, or other vital public services will be cut back even harder to make up the difference. That means services such as keeping street lights on at night, filling in potholes, repairing broken pavements, sweeping the streets, removing dumped rubbish, emptying the bins, maintaining parks, providing youth services and children’s centres and keeping libraries and museums open. All those things that affect the quality of life of every community are under threat because of the Government’s decisions on funding local services. I urge the Minister to explain whether it is his Government’s policy to close the funding gap and ensure that older people get the care that they deserve—or will he stand back and watch as services are decimated?

The Government have come up with a cunning plan to cut the NHS while pretending to have kept their promise not to. Services have been taken out of the NHS and then cut before being handed over to councils in the clear expectation that the councils will take the blame for the chaos that will follow. Particularly affected will be treatments for drug and alcohol abuse and work to tackle the country’s obesity crisis and to prevent sexually transmitted infections. Not only is that a bad idea in health terms, but it makes absolutely no sense in financial terms. We will all be made to pay the cost of dealing with health crises as they get worse because of short-sighted, short-term funding cuts. In the words of the LGA, which, let us remember, is led by the Conservative party, these

“drastic cuts will have a major impact on the many prevention and early intervention services carried out by councils.”

Labour welcomes the Government’s proposal to allow the full retention of business rates, although we are disappointed that that will not happen before 2020. Nevertheless, without an effective equalisation measure, the Government’s plans for business rates devolution will make the system even more unequal. Without certainty about what further services will have to be paid for, there is no knowing whether it is simply cover for yet more Government cuts. Westminster City Council accounts for 8% of England’s entire business rates intake—that is more than Birmingham, Manchester, Sheffield, Liverpool and Bristol combined. The Minister promised me in the main Chamber that the Chancellor would make the equalisation mechanism clear during the autumn statement, but the statement came and went with no announcement. Worryingly, the Municipal Journal quotes a senior official saying that the Department for Communities and Local Government has done “no thinking” about how the system will work. Will the Minister explain why not? Does the fact that the Department has done no thinking explain why the Chancellor did not make the announcement that the Minister told me he would?

The entire financial crisis stemmed from the irresponsible behaviour of the banks, but instead of being open about their response to dealing with it, the Government are cutting councils harder and harder while coming up with ever more ingenious ways to try to cover up what they are trying to do. By the end of this Parliament they will have cut council funding by more than two thirds, with Britain’s poorest communities suffering the biggest cuts. Unfair funding, council tax hikes and an assault on the quality of life of every community in the country—that is the Tory record on local government funding. It is simply unacceptable.

I congratulate the hon. Member for Leicester West (Liz Kendall) on securing the debate, and it is a pleasure to respond to it. Before I proceed, I want to acknowledge the hard work and dedication of councils across the country over the past five years and the contribution they have made to improving local services in challenging times. However, we need to make more savings as we finish the job of eliminating the largest deficit in post-war history.

We listened carefully to councils when preparing the provisional settlement that was recently consulted on. I thank everyone who took the time to respond to the consultation and made considered comments about our proposals. I and my fellow Ministers spoke to local government leaders from across the country and many colleagues in the House. Although the hon. Lady did not make representations to that consultation, I am pleased to be able to discuss these issues with her today. I thank all Members who took the time to respond to the consultation, and I thank councils for their detailed and considered comments on our proposals. We are reflecting carefully on them at the moment.

We have previously had one of the most centralised states in the world—almost 80% of council spending was financed through central Government grants at the start of the previous Parliament—but councils will be entirely financed by their own resources by 2020. Local government will retain 100% of the business rates, fees and charges raised by councils, leaving them fully accountable to the electorate rather than Whitehall. Those huge changes will not be made without careful consideration and consultation in the coming months. Hon. Members will have the chance to have input into the design of the new business rates retention process, which is the other side of the Government’s devolution agenda.

The Minister might recall that that was almost exactly the argument that was used to justify the poll tax—[Interruption.] Oh yes, it was. Does he accept that local authorities with lower tax bases will not benefit from the changes unless there is a proper recognition of need? If anything, the situation will get worse.

I have got very little time, but I have made my views on that point very clear to the House in recent months.

Hon. Members will have the chance to get involved in the process of business rate retention in the coming months. The Government do not underestimate the challenges. Local government representatives consistently tell me, as they told my predecessors over many years, that greater certainty about their income over the medium term would enable them to organise more efficiently and strategically, and put their safety-net reserves to more productive use. This settlement will for the first time ever offer a guaranteed budget to every council that desires one and can demonstrate efficiency savings for the next year and every year of the Parliament. Four-year settlements will give local government more certainty and confidence. Councils will also be able to spend 100% of capital receipts from asset sales to implement cost-saving reforms.

As we move to a world of full localisation of income, it does not make sense to talk simply about Government grants, as a number of Opposition Members did. As colleagues know, the revenue support grant will be phased out by 2020, but local government will still spend significant sums of money. Therefore, it makes more sense to talk about the wider measure of council spending power, which we improved after listening to the Public Accounts Committee and the Communities and Local Government Committee. We no longer include the NHS-scored better care fund or the ring-fenced public health grant in the calculation, since councils cannot spend those funds as they wish.

Overall, our proposals are fair. Councils’ core spending power will remain virtually unchanged over the Parliament—it will go from £44.5 billion in 2015-16 to £44.3 billion in 2019-20.

I am sorry, but I have not got time to give way again. There are a number of things I need to talk about, but I will come to the issue of rural areas in a moment to address my hon. Friend’s earlier point.

Real-terms savings of 6.7% are required over this spending review period, compared with the 14% savings announced in the 2010 spending review. Even the Institute for Fiscal Studies recognises that that is substantially lower than the spending reductions that councils had to deliver between 2009-10 and 2015-16.

On adult social care, we responded to the clear call from all tiers of government and many colleagues in the House to recognise the importance of the growing cost of caring for our elderly population. The Local Government Association and the Association of Directors of Adult Social Services asked for £2.9 billion by 2020 as a contribution to the cost of social care. In the settlement, we make up to £3.5 billion available by that year. It will be distributed fairly to local authorities with social care responsibilities. There will also be a package of support for councils working with the local NHS to address pressures on care, a dedicated social care precept of 2% per year, and a fund of £1.5 billion by 2019-20 to complement the new precept. We recognise that councils providing services in rural areas face additional costs, so we have proposed that the rural services delivery grant should be quadrupled from £15.5 million this year to £65 million by 2019-20 to address those issues.

Let me cover one or two of the points that the hon. Member for Leicester West made. She and a number of other Opposition Members spent a lot of time talking about the effect that the reduction in central Government spending will have on local government. They have very quickly forgotten that their election manifesto clearly set out a path for reducing local government spending. They may wish to take that into account. The core spending power measure is the most accurate way of measuring councils’ expenditure. Leicester has a core spending power of £2,003 per household this year, compared with the English average of £1,829, so I hope that reassures the hon. Lady that Leicester is not getting a bad deal.

On the point made by the hon. Member for Croydon North (Mr Reed) about council tax, the Conservative party will not listen to any lectures from the Labour party. Council tax is 11% lower in real terms than it was five years ago. I remind the hon. Gentleman that council tax doubled under the Labour Government between 1997 and 2010, so the Labour party clearly says one thing in opposition and does something else in government.

We recognise the challenges that have been raised today and those that lie ahead. This is a time of big opportunity and expectation for local government reform. We are moving to a world long desired by local government, in which councils are financed by local sources. Whitehall’s apron strings will be cut. Central and local government are decisively addressing social care pressures, and we are beginning to design long-term integrated care and lasting local solutions.

I know that these changes require a lot of hard work from councils, but changes always do. However, I am confident that, after we have carefully considered the consultation responses before announcing the final settlement, and after we have undertaken a further period of meaningfully engaging and working with local government to design a 100% business rates retention scheme, hon. Members will agree that a better future of proper local control is becoming a reality at last.

With the greatest respect, that was a head-in-the-sand denial of the problems. The Minister said that, overall, the Government’s proposals are fair. They are not. The areas with the greatest need and the most deprived communities have been hit hardest.

I ask the Minister to look again at what is happening to adult social care. I am deeply concerned that care home providers will fail and that vulnerable elderly people will not get support. That will pile pressure on the NHS, and in the end we will have to pay the cost, but it will be more expensive and done in the least efficient way. Opposition Members will continue to press the case for fair funding for our councils and communities.

Motion lapsed (Standing Order No. 10(6)).