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Local Government Finance

Volume 605: debated on Monday 8 February 2016

With permission, Mr Speaker, I am pleased to report to the House my response to the consultation on the provisional local government financial settlement for the next financial year. I have considered all 278 responses to the consultation, and my Ministers and I have met local government leaders of all types of authority and from all parts of the country, as well as many colleagues in this House. I have listened carefully to each of them. Colleagues who have worked with me before know that I always take the views of Members of this House seriously, and I always respond when I can to practical and sensible suggestions. I am grateful to everyone who has taken the trouble to make such suggestions.

The provisional settlement contained a number of important innovations. First, although the statutory settlement is for 2016-17, I set out indicative figures to allow councils to apply for a four-year budget extending to the end of the Parliament. Such a change permits councils to plan with greater certainty. That offer was widely appreciated in the consultation, which is not surprising as local government has been requesting it for years. I want to give councils time to consider this offer and to formulate ways to translate that greater certainty into efficiency savings. I will therefore give them until Friday 14 October to respond to the offer, although many have done so positively already.

Secondly, in the provisional settlement I responded to the clear call from all tiers of local government, and many colleagues across the House, to recognise the important priority—and growing costs—of caring for our elderly population. In advance of the spending review, the Local Government Association and the Association of Directors of Adult Social Services wrote to me requesting that an additional £2.9 billion a year be made available by 2019-20. Through a dedicated social care precept of 2% a year—equivalent to £23 per year on an average band D home— and a better care fund of £1.5 billion a year by 2019-20, we will seek to address those pressures on care. The provisional settlement made up to £3.5 billion available by 2019-20.

Thirdly, recognising that council services in rural areas face extra costs, I proposed in the provisional settlement that the rural services delivery grant be increased from £15.5 million this year to £20 million in 2016-17—the year of this settlement—and provisionally to £65 million in 2019-20. Councils and colleagues who represent rural areas welcomed that, but some asked that the gap in central Government funding between rural and urban councils should not widen, especially in the year for which this statutory settlement is intended.

Fourthly, this year’s provisional settlement marked the turning point from our over-centralised past. At the start of the 2010 Parliament, almost 80% of local councils’ expenditure was financed by central Government grant. By next year, revenue support grant will account for only 16% of spending power, and by 2019-20 only 5%. Ultimately, revenue support grant will disappear altogether as we move to 100% business rates retention. Local finance through council tax and business rates, rather than central Government grant, has been a big objective of councils for decades. However, many authorities and many hon. Members, especially those from counties such as Dorset, Leicestershire, Hampshire, Worcestershire, Lancashire, and several London boroughs including Kingston and Havering, have argued for transitional help during the first two years when central Government grant declines most sharply. They have argued that other local resources would not have had the time by then to build up fully.

Much in the provisional settlement was welcomed, but specific points were raised about the sharpness of changes in Government grant in the early years of this Parliament and there were concerns about the cost of service delivery in rural areas. Another very important point was made: many colleagues and councils felt that too much time has passed since the last substantial revision of the formula that assesses a council’s needs and the cost it can expect in meeting those needs. These responses to the consultation seemed to me to be reasonable and ought to be accommodated if at all possible.

Everyone will appreciate that the need to reduce the budget deficit means that meeting the recommendations is extraordinarily difficult, but I am pleased to be able to meet all of the most significant of them. I can confirm that every council will have, for the financial year ahead, at least the resources allocated by the provisional settlement. I have agreed to the responses to the consultation, which recommended an ease in the pace of reductions during the most difficult first two years of the settlement for councils that experience the sharpest reductions in revenue support grant. I will make additional resources available in the form of a transitional grant, as proposed in the response to the consultation by colleagues in local government. The grant will be worth £150 million a year, paid over the first two years.

On the needs formula itself, it is nearly 10 years since the current formula was looked at thoroughly. There is good reason to believe that the demographic pressures affecting particular areas, such as the growth in the elderly population, have affected different areas in different ways, as has the cost of providing services. I can announce that we will conduct a thorough review of what the needs assessment formula should be in a world in which all local government spending is funded by local resources, not central grant. We will use it to determine the transition to 100% business rates retention.

Pending that review, and having listened to colleagues representing rural parts of the country, including Cornwall, Lincolnshire, Devon, Cumbria and Northumberland—

And indeed Wiltshire. I suspect I may have the opportunity to respond to colleagues. In fact, distinguished local authority leaders are with us today.

I propose to increase more than fivefold the rural services delivery grant from £15.5 million this year to £80.5 million in 2016-17. With an extra £32.7 million available to rural councils through the transitional grant I have described, this £93.2 million of increased funding compared with the provisional settlement is available to rural areas. Very significantly, this proposal ensures there is no deterioration in Government funding for rural areas compared with urban areas for the year of this statutory settlement.

At the request of rural councils, I have also helped the most economical authorities by allowing them to charge a de minimis £5 a year more in council tax without triggering a referendum. I will also consult on allowing well-performing planning departments the possibility to increase their fees in line with inflation at the most, provided that the revenue reduces the cross-subsidy the planning function currently gets from other council tax payers.

A final point from the consultation: although the figures for future years are indicative, a small number of councils were concerned that, as their revenue support grant declined, they would have to make a contribution to other councils in 2017-18 or 2018-19. I can confirm that no council will have to make such payments.

These are important times for local government. The devolution of power and resources from Whitehall is gathering momentum, yet I am aware that there is serious work for councils to do to continue to provide excellent services for residents at the lowest cost possible over the years ahead. I acknowledge the important role of Members in representing to me the recommendation of councils that deliver the services on which all our constituents depend. I am grateful for all their contributions.

My response to the consultation has been positive in respect of very sensible recommendations and as fair as possible, while holding firm to our commitment to free our constituents from the dangers inherent in the national deficit. I commend the statement to the House.

I thank the Secretary of State for his courtesy in providing me with an advance copy of his statement. We welcome some of the announcements made this afternoon. It is clearly a good thing that more money is being provided to rural communities that are particularly hard hit, but will he explain exactly where the additional funding is coming from? It sounded like a sum of just over £200 million, but that obviously represents a massive shortfall in relation to the billions required to meet all the spending pressures. Nevertheless, where is this additional funding coming from? Has he had to cut other areas of local government expenditure to deliver the additional money? Above all, will he confirm that all this is purely transitional? It reminds me of someone speeding along the road into a disaster who then says he will take his foot off the accelerator without changing the destination. Local government is facing a disaster.

The Secretary of State’s provisional announcement the other week seems to have added some unusual recruits to Labour’s Anti Austerity Alliance. I wonder whether the right hon. Gentleman knows the identity of the anonymous Tory MP who told “ConservativeHome”, which is essential reading—[Interruption.] It certainly is true. This anonymous MP said:

“Councillors have done the right thing, and done it well, in saving vast amounts of money in the last few years. But now all the fat is gone, all the meat is gone and government wants to gnaw on the bone. I’m not having my local swimming pools and libraries closed down”—

and I say hear, hear to that! Is the Secretary of State really gnawing on the bone of local government, as many people feel—in his party and elsewhere? Does he acknowledge that, according to the Tory-controlled Local Government Association, even if every council in England increased council tax by the maximum allowed by the Government for the next four years and even if every penny of that increase went only on supporting the elderly, that would still leave a funding gap of over £1 billion on social care alone?

Only last March, the then Minister responsible for social care promised that the Government would end the infamous 15-minute flying visits. Is that still the Secretary of State’s policy, and if so, how will it be funded, given the £1 billion shortfall? When does the right hon. Gentleman envisage the Government achieving this target?

On how the Government distribute funding between councils, how does the right hon. Gentleman explain the manifest injustice that the most deprived areas have been cut the most? As things stand, the 10 most deprived areas in England will be 18 times worse off than the 10 least deprived areas. How will he explain to hard-pressed families that their services will be cut at the same time as he is engineering council tax increases—up to about 20%, we estimate, by the end of this Parliament?

It is clear from the Secretary of State’s statement that he has studied carefully the representations made by the Rural Services Network, as well as by some anonymous Tory MPs. Perhaps some of them were not anonymous. The Rural Services Network is also Conservative-led, and it said that his provisional statement would

“make life for hundreds of thousands of people across all areas of rural England totally insufferable.”

That is what the Tory rural network said. Can the right hon. Gentleman guarantee that the relatively small increase in the rural services delivery grant announced today will mean that no county councils will have to cut home helps or children’s homes or public transport? Is he really recommending to rural districts that they increase council tax by a precept of at least 2% or by £5—not by whichever is the lower, but by whichever is the higher? Does he acknowledge that more than £20 billion has been cut from local government since 2010? Is not the truth that during the Government’s first term, the impact of these cuts was felt primarily in the more urban northern and London boroughs, and is now spreading far and wide throughout the English countryside?

I represent 20 rural villages. There is no doubt that the provisional settlement was devastating for rural England—how could the Secretary of State make such an announcement? —and that the settlement he has announced today is far from adequate. Will he confirm, as it is transitional, that he intends all the cuts that he announced at the time of the provisional settlement to be imposed on rural areas in due course, during the present Parliament? When will he give the House details of any equalisation measures that he intends to introduce in relation to business rates?

Does the Secretary of State accept that all these cuts are, in essence, a political choice rather than an economic necessity? Should the Government not learn lessons from other members of the European Union that are raising hundreds of millions of pounds more than we are in tax from Google and other multinationals—money that could be used to support public services? Is it not time that the Chancellor showed some guts and stood up to the multinationals, rather than attacking the purses, and the services, of the poorest?

I am delighted to hear about the hon. Gentleman’s reading material and to learn that it is through “ConservativeHome” that he seeks to educate himself these days. That makes a change from the red book that is the preferred choice of the shadow Chancellor. I encourage him to continue. He will know from looking at that very good website that there is constant praise for the efficiency of Conservative councils, which have a record of economy and good service for their residents.

As for increases in council tax, the hon. Gentleman will know all about that, because the Labour Government doubled council tax. According to projections from the Office for Budget Responsibility, at the end of this Parliament, it will be lower in real terms than it was at the beginning of the last Parliament, so we will take no lessons from the hon. Gentleman about council tax.

I detected a half-hearted welcome for the transitional funding, which is just as well, because some Labour council leaders called for precisely that, and I think they might have been disappointed if the hon. Gentleman had not supported them. He asked where the money would come from. I can confirm that it will not come from the local government financial settlement. We have been able to find resources outside the settlement, and, thanks to the generosity of the Chancellor, we are able to add them to it. I can also confirm that the social care precept was requested by local councils, which recognised, in a cross-party consensus, that as the population grows more elderly, there are more elderly people to be looked after in each council area. That is not a reflection on the efficiency or otherwise of councils; it is a demographic fact of life. It is right for us to provide for our elderly people in their retirement.

The hon. Gentleman mentions anonymous people and important figures in Conservative local government. My experience of my colleagues in every part of the House is that they are not anonymous, and they are not shrinking. They know that they can come and talk to me any time and that I will listen and respond when they make a good case. As for our leaders in local government, including the head of the Local Government Association, I could not help noticing the presence in the Chamber today of the gentleman concerned, and he seemed to have a happy smile on his face. I do not know whether that says anything to the hon. Gentleman.

Order. I remind the House that Members who came into the Chamber after the statement began cannot expect to be called. Our convention on that matter is very clear and people need to abide by it.

The Secretary of State is to be congratulated on having negotiated a difficult minefield with considerable skill. I particularly thank him for his thoughtful approach and for the time that he gave to me, my fellow MPs and my council leader from Bromley when we came to see him. I welcome the fact that he has picked up on the importance of transitional relief in so far as it affects the London boroughs, given the risk that outer London’s particular circumstances can sometimes be lost in the equation. Can he give me details of the timeframe for the operation of the transitional relief? Can he also tell me more about the review of the needs element, which many of us welcome? I regret that we were unable to do that in coalition, but there were many other pressing matters at that time. It is important that the comparatively low unit costs incurred by historically efficient local authorities should be picked up when setting the baseline for retained business rates.

I am grateful to my hon. Friend. I recall spending a very pleasant evening with the Cabinet of his council in Bromley and having a more recent meeting there. It is right to think of the demographic pressures in the outer London boroughs. Those boroughs, and many other places across the country, have made the case that the population has aged and more people tend to retire to those places than to others. They also contend that the formula, which has not changed for 10 years, has not kept up with that. I can confirm that the transitional funding will be available immediately, from the next financial year, so that my hon. Friend’s council and others will be able to apply those extra funds straight away.

I thank the Secretary of State for giving me slightly advance notice of his statement. It comes against a background of cuts to local government in England; I understand that the figures are 27% over the past years and 8% for the years ahead. I am glad that he has at least given local councils a bit of time to think about this, and I hope that they will get back to him with their views on the settlement. I note what has been said about the pressures on rural service delivery, but the breakdown of the core spending power appears to show that areas that are already very wealthy are going to get more. He also mentioned that the percentage of council expenditure financed by central Government grant was going down from 80% to 5%, but I wonder how much of that is just cuts rather than changes to the expenditure.

There does not seem to be enough time for councils to respond to the proposals. The Secretary of State has talked about giving them two years to respond, but that does not acknowledge the difficulties that some councils will have in raising funds from business rates and council tax. Some will be starting from a relatively low base in that regard, and I am not convinced that two years will be enough transition time for them. Also, the statement does not seem to mention any recognition of needs. It talks about demographic pressures, but age is not the only such pressure that communities face. There needs to be greater acknowledgement of that fact in these plans. Other demographic pressures exist, and areas of multiple deprivation will require additional support and transitional relief. I would like to see greater recognition of that in the proposals.

I am grateful to the hon. Lady for her contribution. She will know from her colleagues in Scotland that setting the local government financial framework is a delicate matter. It involves a lot of decisions that affect people in different ways, and I hope she will acknowledge that I have done this in a fair way. She talks about the transitional relief lasting for two years. This will happen because the shape of the settlement will see resources increasing towards the end of the period, as the social care precept and the Better Care Fund take effect. However, colleagues across the House felt that the first two years would be the most severe time, and I therefore felt it right to focus the transitional relief on that period. The hon. Lady mentioned an assessment of needs, and I completely agree with her. The review to which I have committed will look at all the needs, and it will consider not only the demographic pressures but the cost of delivering services, because that is a fair way to proceed.

Will the Secretary of State give me any more detail on how the welcome transitional relief will abate the severe cuts in his original plans for both Wokingham and West Berkshire?

I will indeed. I was grateful to my right hon. Friend for his meeting with me and the representations he made. Again, both of his local authorities felt that the early years were the most pressing, so I can confirm that there will be transitional funding for West Berkshire of £1.4 million and for Wokingham of £2.1 million in the year ahead. I think that will be welcomed by his authority, following my having carefully studied its representations to me.

May I again tell the Secretary of State about the ongoing cuts in my borough because of the lack of funding? Would he be willing to meet the Tory leader of the council to discuss what is happening on the ground and the adverse impact on my constituents and others in the borough of the continuing cuts? Will he come to the borough to see for himself what is happening and to see that I am in no way exaggerating the position?

I regularly meet that local leader. The west midlands is a very important area where we are negotiating a very important devolution deal at the moment. The hon. Gentleman will know that his local authority has benefited from the settlement, so that over the four years its spending power will increase by 1.5%, which I know will be welcomed locally.

I thank my right hon. Friend for the careful and diligent way in which he has approached this matter. Does he agree that what seems to be so difficult for local government, particularly in rural areas, is that some counties and authorities, such as my local Mid Sussex District Council, run their affairs in an exemplary and very orderly fashion, but the more efficient and effective they are, the less money they get? That seems to be a completely idiotic way of proceeding.

Indeed it is, which is exactly why we are making the transition to business rate retention, where it is not the representations that councils make to central Government for grants, but their ability to attract businesses and to grow those businesses that will be the determinant of the resources they have available. Councils and Conservatives have long wanted that, and I am confident that both my right hon. Friend’s county council in West Sussex and his excellent district council, the membership of which I know very well, will respond with great alacrity to the opportunities available to them.

The crisis in social care in Liverpool will not be resolved by either the new precepts suggested or the Minister’s statement today, as it is the result of the 58% cumulative cut in funds by central Government on the poorest area in the country. Will he take another look at this very critical situation?

The introduction of the precept and of the Better Care Fund will be very important for Liverpool; by the end of the period it will deliver about £30 million a year to spend, quite appropriately, on the care of elderly people in Liverpool. I would have thought the hon. Lady would welcome that. Conservative county council leaders proposed that there should be a social care precept, but it would benefit her city as much as it does them.

I thank the Secretary of State for the meeting he held with me and other Suffolk Members to discuss local funding. I know he has worked hard on our behalf, and I cautiously welcome his announcements today, particularly those on additional funding to ease the pace of reduction during those first two years. However, will he inform the House as to when final figures will be given to councils?

I will indeed. I was grateful for the meeting I had with my hon. Friend, and I am looking forward to the discussions of further devolution to Suffolk for the East Anglian powerhouse or motor—we will coin an apt description for that very high-performing part of the country. The funds will be available right from the beginning of the next financial year and, in the usual way, they will be confirmed to councils following this statement.

I can see the Parliamentary Private Secretaries working hard to get the figures to the Secretary of State.

To put the announcement in context, Halton has had a cut of more than 50%—£52 million—since 2010, while 68% of properties there are in bands A or B. The precept will not raise anywhere near enough to fund the shortfall in social care. Will the Secretary of State reconsider this and meet me urgently to talk about the problems in Halton?

I am always happy to meet the hon. Gentleman. He will know that the funding allocation took into account the different resources of different areas—and Halton was a beneficiary of that—but I am happy to meet him to take him through the figures so that he can better understand.

Like others, I thank my right hon. Friend for the meetings he has had, particularly with my right hon. and hon. Friends from Leicestershire. As he will know, our county historically has been one of the worst funded from central Government, and we are hopeful that the new deal will benefit not only central Government but Leicestershire. Will he tell the House when we are likely to get the numbers, which the county council can deal with, and what they will be?

I certainly will. I am grateful to my right hon. and learned Friend for his advice on this matter. I think Leicestershire will make a particularly strong case for a review of the match between needs and resources. Rather than keeping him hanging on, I can tell him that the transitional funding for Leicestershire will be £3.3 million.

For the benefit of the PPSs, my local authority is County Durham. It is a bit off, Mr Speaker, that the Secretary of State has all the figures, but they have not been released to councils, which means we have no way of scrutinising his answers.

I wish to raise the point also raised by my hon. Friend the Member for Halton (Derek Twigg) about the Better Care Fund. I agree with the Secretary of State that this issue affects all councils, but County Durham has a low council tax base, as most of its properties are in bands A or B. He just said this will be taken care of in the formula. Will he meet me and north-east MPs whose councils are disadvantaged by not being able to raise the cash that larger authorities, such as Westminster, can?

Usually the complaint is that others are told first. In this case, I fear some people are complaining that the House is being told first. I cannot see what is wrong with that. It seems a highly desirable state of affairs. I might have misunderstood, but I think I have understood.

I am grateful, Mr Speaker.

I had conversations with the hon. Gentleman’s local authority, and it made some very positive comments and suggestions for the settlement, but I am always pleased to meet him to discuss the important devolution taking place in the north-east of England, of which we are very proud.

I warmly congratulate the Secretary of State on his announcement. As he will be aware from our representations, Herefordshire was looking at a 34% reduction in the rural services grant next year, against a uniform reduction of 25%. Any support will be much appreciated. Is there not a danger that low-economic-activity areas—I am afraid that my own county has historically been such an area—might be penalised by the transition to council tax being supplemented by rural rates, unless there is a transitional fund to stimulate economic growth alongside it?

My hon. Friend makes a good point. I think that Herefordshire has great potential in terms of attracting and growing businesses. For example, he has been a doughty campaigner for a university in Hereford. He is right that the transition to a world in which local resources fund councils has to take account of the needs of each area and its potential to raise revenue. That is why I announced the review today. Several colleagues from across the Chamber have contributed to, and have great expertise in, this matter, and I hope, in the spirit of this statement, that they will contribute personally to that review.

I, too, am concerned about the future stability of funding for local services. While council tax provides a solid base of revenue, moving to more reliance on business rates means more unpredictability in the level of revenue available to local councils. What consideration has the Secretary of State given to future mitigation of the impact on local services of a fall in revenue from business rates—for example from a downturn in the economy, which is beyond the control of any local council?

The great advantages of the devolution deals that we are striking, including with Greater Manchester—[Interruption.] The hon. Lady raises her eyes, but the elected leaders of Greater Manchester have proposed a means of taking on the 100% retention of business rates and making sure that they can manage the ups and downs of that across the years. This is a proposal that they have made, so that, in attracting more businesses to Greater Manchester, the whole of that great city will benefit.

Can my right hon. Friend assure me that his final settlement reflects the accurate level of reserves that are truly available to Essex County Council?

I have made no assumption of reserves. In advance of the spending review, several commentators suggested that we should take account of councils’ known reserves. I resisted those calls, and it seems that it is reasonable for councils to have reserves, just as, as a nation, we are looking to create a surplus as a buffer against the ups and downs of the economy in the years ahead, which is something that the Labour party failed to do. The great advantage of a four-year settlement is that it gives that certainty to councils, so that part of the reserves that they keep against the uncertainty of year-to-year settlements is available to them, but I have made no assumptions that they will use them.

At my surgery on Friday, I met a woman who cared, on her own, for her severely disabled daughter 24 hours a day, seven days a week. She is not able even to get a decent night’s sleep. She used to receive six nights of respite care a month, but now she has been told that she will get nothing. That is the reality of the Conservative party’s treatment of local government since 2010. In Tameside, there are no more back-office functions to merge and no more staff to be made redundant. There is nothing left to cut, except the services for the people who need them most, and for them the outlook is bleak. No amount of devolution to Greater Manchester, as good as that is, can compensate for a lack of basic provision.

May I suggest to the hon. Gentleman that he goes next door and has a cup of tea with the leader of Trafford council, which runs its services extremely efficiently? I dare say that it would be sensible of Tameside to take up any advice that the council leader is able to give.

May I thank the Minister for revisiting this issue? Does he accept that what all Members who represent rural areas want to see is fairness in the funding system? Although Gloucestershire may seem to be a leafy, wealthy county, there are areas of deprivation. We have flooding problems and a higher percentage of older people who, regardless of where they live, still need social care. May I ask him to ensure that the final settlement reflects the problems in rural areas as well as in other areas?

I completely agree with my hon. Friend. I was grateful to my colleagues from Gloucestershire for the representations that they made. He will be pleased to hear that the pressure on them will ease for the first two years—it will be to the tune of about £2.5 million next year—which, knowing the pressures on the council for exactly the reasons that he said, will be welcomed locally.

At £0.75 billion, no council has ever suffered the same level of cuts in local government history as Birmingham. No city has ever been treated so unfairly. Does the Secretary of State begin to understand the dismay that there will be over today’s announcements, which will put at risk school crossing patrols, deepen the growing crisis of health and social care in the city and threaten dozens of community groups supporting the most vulnerable in Birmingham? There will be utter dismay in Britain’s second city.

The figures that I have published today include an extra £800,000 from the new homes bonus for Birmingham that was not included in the provisional settlement. I should have thought that that was a cause of some pleasure in Birmingham, rather than the opposite.

Really well done to the Secretary of State on the statement, the uplift in the rural services delivery grant and the review that he has announced. However, what assumptions has he made about the uplift in parish and town council precepts, given the assertion he made a few moments ago about the proportion of local government spend that would be consumed by the revenue support grant by the end of the decade? He will know that those precepts have gone up as the RSG has gone down, as in many places the council tax has been frozen.

My hon. Friend makes an important point. There have been representations in the past to include parish and town councils in the referendum principles. We have not done that, but we keep it under review so that there is economy in those councils, which is important, because their residents are also council tax payers who pay council tax to his county council.

Hull is the 10th most deprived area in the country, and over the next year it faces spending cuts on average nearly 50% greater than those faced by county councils, so will the Secretary of State explain to my constituents why county councils are getting additional moneys, but not areas such as Hull?

County councils and other authorities in the first two years experienced sharper reductions in the revenue support grant, and representations across local government, including Labour authorities, suggested that we should ease the transition. I would say to the hon. Lady’s constituents in Hull that much attention has been paid to that important city through the growth deal that we established, which invested substantially in the area. The prospect of further devolution offers more important opportunities for that city.

I thank my right hon. Friend for meeting colleagues and me, and for listening to rural communities. I warmly welcome the statement. An ageing population is a key driver of cost, so will my right hon. Friend ensure that future funding formulae, instead of using out-of-date figures, will keep up with the changing demographics in areas such as North Yorkshire?

Indeed. That is one of the points that my hon. Friend and other colleagues have made, which is why I have responded by saying that we should look again at that funding formula. It was also a point made by Carl Les who, as my hon. Friend knows, is the excellent leader of North Yorkshire County Council, and I am pleased that we have been able to meet his request.

Did the Secretary of State consider including the Chancellor’s social care tax in the calculation of overall council tax income for the core funding settlement, which would make the changes fairer and mitigate the late introduction of the better care fund for low council-tax base authorities such as Birmingham?

The social care precept is recognised across all parties and different types of authorities, even those, including district councils, that do not receive it. Their residents are residents of counties and of metropolitan boroughs, and it is important that funding is there. The combination of the precept and the better care fund provides up to £3.5 billion. I repeat what I have said: the representations that I received before the spending review from the Local Government Association and directors of social services was that they needed £2.9 billion. We have provided £3.5 billion.

May I thank my right hon. Friend for his patience and courtesy, and ministerial colleagues and indeed officials at the Department for Communities and Local Government for theirs in their dealings with colleagues from Dorset, including the leader of the county council and me? It is appreciated, and I welcome wholeheartedly today’s announcement from my right hon. Friend. If it was parliamentary, I am sure that rural local government would plant a big, wet kiss on the cheek of the Secretary of State—but I am not entirely sure that that is parliamentary.

Will my right hon. Friend give further details of the transitional funding for Dorset that he has announced? The devil is in the detail, as always, so will he set out further information on the timing of the welcome review of the assessment of needs? The sooner we can get that sorted out, the better for rural local government.

Before the Secretary of State provides a comprehensive and, I am sure, scintillating reply to his hon. Friend, I take this opportunity to say what a delight it is to see our new Serjeant at Arms in the chair.

May I add my welcome to the new Serjeant at Arms?

Given what my hon. Friend the Member for North Dorset (Simon Hoare) said, I am grateful that he is sitting far away from the Dispatch Box. I am grateful, however, for his good wishes. Dorset is a well-run county council, and it has important costs as a result of being a beautiful rural county. The extra funding that it will receive from April this year will be £4.10 million which I know, having spoken to the leader of the council, will make a big difference in managing the transition that was a great concern for the authority.

Slough is the smallest unitary authority in the country. In response to questions, the Secretary of State announced that fellow Berkshire unitary authorities, West Berkshire and Wokingham, will receive £1.4 million transitional funding. Slough faces particular pressures, as it is on the border of London and has a changing, high-needs population. What are we going to get?

It sounds as though the right hon. Lady wants to participate in the review of needs and of the cost of delivering those needs, so I am surprised that she has not welcomed the announcement that I have just made.

I welcome the additional funding that my right hon. Friend has announced to ease the pace of reductions during two the most difficult years, which in Northumberland seemed to be a really frightening challenge. Will he confirm that the revised settlement means that the position in Northumberland, which continues to have one of the highest populations of elderly people, will be secure?

The benefit for Northumberland is twofold. First, there is additional funding from the rural services delivery grant and the transitional grant that I mentioned, both of which are important and will be welcomed by people in Northumberland. Secondly, the review of the cost of delivering services in rural areas and the increased demands there is something for which my hon. Friend’s constituents and councillors called, so it is right that we should get on with that straightaway.

The recent report by ResPublica said that 37,000 elderly people who were dependent on statutory funding for residential care were at risk of losing their places and becoming homeless because of the rise in the minimum wage and cuts to local council funding. Areas such as mine which, for the benefit of the Parliamentary Private Secretary to the Secretary of State is Hove in Sussex, will do reasonably out of the precept because of the high tax base, but other areas with a low tax base, such as the north-east, will suffer very badly, and they have the highest rates of dependency on statutory funding for adult social care. Will the Secretary of State look again at the funding formula and make sure that areas that most need funding get it?

I have just said to the House that I intend to look again at the funding formula to make sure that areas with the highest costs and pressure are funded accordingly.

The well-run West Berkshire Council faces a cut in the RSG of 44%, so I am grateful that my right hon. Friend and his ministerial team have listened to the many entreaties from my right hon. Friend the Member for Wokingham (John Redwood) and me.

Will the Secretary of State do two things? First, will he say whether it is possible to envisage a speeding-up of work on the retention of business rates, because that would resolve many problems for local authorities such as West Berkshire? Secondly, would he have a word with his colleagues in the Department of Health and tell them to pull their finger out, as they have agreed a deal to return funding under the Care Act 2014? They promised to do that, and it would make a massive difference to settling this year’s budget.

My hon. Friend is right: he has a well-run council, and representations from him, our colleague and the council led me to make the changes that I have made. On the early retention of business rates, I am glad that he has given me the opportunity to say to all Members that, through the devolution deals, we are keen to get on with the devolution of business rates. I encourage all areas to introduce proposals on that. The Chancellor has made a commitment that that should be in place by 2019-20, but that is “by” rather than “in”, and I should have thought that West Berkshire and its neighbours were well placed to put together a good case for that.

I always had the Secretary of State down as a fairly bright chap, but this would be a fair settlement only if it were predicated on every area having an equal council tax base and equal levels of need. Representing as I do a cross-borough constituency—for the PPSs, that is Tameside and Stockport—I know that those two local authorities are very different in their ability to raise income. Tameside, for example, this year has a £16 million deficit in adult social care. The levy on council tax—the 2% precept—will raise £1.4 million only. How does the Secretary of State plan to fill that gap?

I have given some advice to the hon. Gentleman’s neighbour, the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), on this issue. If the hon. Gentleman would like me to arrange for him to meet Sean Anstee, the leader of Trafford council, I think he would find it a very constructive conversation. In a world of devolution, Trafford may be able to provide some advice and assistance to the hon. Gentleman’s borough council on running an efficient set of services.

I welcome the £3.3 million transitional relief for Leicestershire which, as my right hon. Friend knows, has been at the bottom of the funding pile. The transitional relief will be widely welcomed in my constituency. Will my right hon. Friend say a word about the discussions he has had on the funding of adult social care, which very much affects our county?

I will indeed. The provisional settlement, as I said in my statement, made a particular response to the acknowledged pressures on adult social care across the country. All tiers of local government cited this as the important priority. The decision to establish the social care precept and the addition to the better care fund were an extremely important step in recognising what has been building up for many years as particular pressures on authorities, and Leicestershire, well run though it is, feels those pressures particularly acutely.

I congratulate my right hon. Friend on listening, with all his Ministers, to the pleas from Derbyshire and South Derbyshire in particular. We are very grateful for the amelioration of the arrangements, but will my right hon. Friend go a little further and think about the changes to the new homes bonus and to business rates, so that although fast-growing districts will get more money in the future, they are not penalised in the short term ?

Indeed. The consultation on the new homes bonus is open until March and it is important that my hon. Friend and her councillors contribute to that. That will be the opportunity to consider those views. As I have made clear today, the important step of 100% business rate retention by local government needs to be accompanied by a fundamental look at the methodology, and I hope my hon. Friend will bring her considerable expertise to bear on this matter.

I thank the Secretary of State for his announcement about transitional relief, which I very much hope the London borough of Havering will benefit from, not just because of its ageing population but because of the increasing demand for children’s services. My right hon. Friend will already know, I am sure, that the 12 inner-London boroughs have more reserves collectively than the 20 outer-London boroughs. Will he reflect further on whether that might be taken into consideration?

I am grateful for my hon. Friend’s suggestion. Havering is a well-run council and it will benefit from the transitional relief. I think it will want to make a good case for the review of the demographic and other pressures it is facing. My hon. Friend invites me to do what I said I would not do—require councils to dispose of their reserves. If I did that, I would incur the displeasure of some of the colleagues who spoke earlier. I have not done that. It is a matter for local government, but a four-year settlement gives every council the ability to plan ahead and make sure it has the right level of reserves for the circumstances it faces.

I join colleagues in thanking the Secretary of State for the manner in which he carried out the consultation. Further to the remarks of the Scottish National party representative, the hon. Member for Glasgow Central (Alison Thewliss), who suggested that rural areas were richer than urban areas, the opposite is true: average earnings are higher in urban than in rural areas, and council tax is much higher. If we allow percentage rises to continue on a much higher base for much poorer people, there is a danger that we will reinforce the inequities in our system. So in a world of business rate retention and council tax, what can the Secretary of State do to ensure that our poorer, older, harder-to-service citizens are not unfairly impacted by ever greater council tax, while the lower council tax areas—often richer people—pay less and continue to be subsidised by us?

My hon. Friend makes an excellent point. I pay tribute to him for conducting a well-reasoned and forensic argument that has been persuasive, and I am grateful for the manner in which he has done that. He is right. It is a false assumption that because an area is rural, it is wealthy and prosperous. Some of the most challenging circumstances are in the most rural areas. That is why, after more than a decade, it is long overdue that we should look at the costs of delivering services in rural areas. We should look at the pressures that they face and set the retention of business rates accordingly, so that they can be recognised in a way that they have not been over recent years.

I warmly welcome the Secretary of State’s statement today and thank him for listening to the concerns of rural areas. He will know, however, that the demographic pressures in places such as Devon are severe, and that the precept, welcome as it is, will quite meet the cost of the rise in the national living wage. During his review, will he set out whether he will listen to other proposals to create a sustainable long-term settlement for social care, which has been described as unfinished business in the “Five Year Forward View”?

I certainly will. I am grateful for my hon. Friend’s words. One knows that more people choose to retire to places such as Devon than to other parts of the country, and it is important that that is recognised in the funds that are available. As everyone knows, my hon. Friend chairs a very important Committee of this House, and one of the essential tasks of this Government over the years ahead will be to make sure that health and social care come together. They are two sides of the same coin. The same people are being looked after, whether by councils or by the NHS. One of the things I am determined to do is to make sure that we have a much better connection between the NHS and social care, and I would be grateful for her advice and that of her Committee in how we do that.

I declare my interest as a member of Kettering Borough Council. The different councils in Northamptonshire will be affected by the settlement in different ways. Perhaps Northamptonshire County Council, which charges the lowest county council tax in the whole country, will be the most vulnerable. The long-term answer to ensuring proper local service delivery in the county might be a restructuring of local government. Will my right hon. Friend confirm that he is open to innovative solutions that could involve a restructuring to ensure that local public services are delivered more efficiently under a different organisation?

It is in the interests of us all that councils are effective and efficient. I have always said that I do not believe in a top-down reorganisation of local government. When that has been attempted in the past, it has not ended well, if I may put it that way. But of course the commitment I have to devolution carries with it the idea that if local people want to do things differently, they should be able to do that, so if there are proposals from Northamptonshire that enjoy the support of local people, they should come forward and have those discussions.

I congratulate my right hon. Friend on his pragmatic approach to these issues. He rightly points out that demographic pressures affect different areas in different ways. When does he expect the needs review to be completed, and what role will the figures obtained from that play in any closer integration of social care with the NHS?

I am grateful to my hon. Friend, who was of considerable assistance to me when we consulted on the national planning policy framework, and we were able to make sensible responses to that consultation too. I am keen to get the review under way as soon as possible so that it can inform not only business rates retention but other decisions the Government have to take from time to time about rural areas and the different needs of different areas. The sooner it is done, the better, and I will set out in the coming weeks the process involved, so that colleagues across the House can contribute.

May I thank my right hon. Friend for the courteous way in which he has dealt with me and Dorset colleagues—it really has been exemplary—and for the £4 million or more for Dorset County Council? Will he confirm—I did not quite hear this, and local leaders are watching the debate—whether the tariff adjustment will stay or go? In 2019-20, Weymouth and Portland Borough Council, for example, will end up paying the Government £500,000 but taking only £123,000 in council tax. I do not think that is fair, and I very much hope that the review will take such things into account.

Indeed. I am grateful to my hon. Friend for his kind words. Not only Dorset County Council but the districts he represents will find the transitional relief and the rural grant important. I have said that we will remove what has been called the negative grant entirely for 2017, 2018 and 2019. By the time we get to the end year of the settlement, 100% business rate retention will come in anyway, so the figures will be influenced by that. My hon. Friend can therefore look forward with confidence to the review, to which his council and, I dare say, he himself will want to contribute.

The funding of adult social care has been one of the biggest pressures on our local authorities given that we have an increasingly ageing population. I therefore thank the Secretary of State for listening to the concerns of council leaders such as Councillor Izzi Seccombe, of Warwickshire County Council, who has spoken regularly on this matter. I also thank him for making sure that more money is available through the better care fund to attend to the needs of these particularly important residents.

I am grateful to my hon. Friend. He is absolutely right: Izzi Seccombe does an excellent job not only in leading Warwickshire County Council but in her national responsibilities in the Local Government Association. She has been very persuasive in making the case for extra funding, recognising the costs of social care. She is one of the most influential and respected council leaders in the country, and my hon. Friend is lucky to have her.

I thank the Secretary of State for his earlier answers to my right hon. and learned Friend the Member for Harborough (Sir Edward Garnier) and my hon. Friend the Member for Bosworth (David Tredinnick), and indeed for accommodating a meeting with all the Leicestershire and Rutland MPs, at which we had a very frank exchange of views about local funding. Will he go a little further and explain what opportunities exist for North West Leicestershire and Leicestershire under the increases to the rural services delivery grant?

I am grateful to my hon. Friend for coming back after questions earlier to consider these matters. There are opportunities for Leicestershire; it and North West Leicestershire will gain in transitional funding. One thing we will need to do in the review is look at areas such as North West Leicestershire to see whether their resources and needs are adequately recognised not only in business rates retention but in calculations for things such as the rural services delivery grant.

Both local authorities operating in my constituency have expressed serious concerns about the draft settlement. What assurances can the Secretary of State give regarding his consideration of those concerns?

As I said earlier, we have listened carefully. The leaders of my hon. Friend’s authorities have made representations, which we have listened to very seriously. I think they will be pleased with the response we have made through the settlement.

The Secretary of State will be aware of the challenge faced by Nottinghamshire, which has been particularly compounded by the issues faced by former coalfield communities. Will he outline the improvements to the funding Nottinghamshire may receive? Will he also meet me to discuss plans for an enterprise zone at Thoresby colliery to enable the county council to find its own way in generating business rates in the future?

My hon. Friend makes an excellent point. Attracting businesses to locate in an area is a sure-fire way of making sure that the resources available to councils continue to grow. I am grateful to him for his question, and I can confirm that Nottinghamshire will receive transitional grant funding of around £2 million next year, which I think will be welcomed across the county.

It was not me who had a cosy little chat with “ConservativeHome” this morning—if, indeed, it was a Conservative MP who did so. However, the idea of some councils having to gnaw on the bone is absolutely accurate, and I refer, of course, to my own council of Bromley, which has been gnawing on the bone, because of its efficiency and competence in providing services. Therefore, I am grateful to the wonderful Secretary of State for visiting Bromley and for agreeing to transitional arrangements for it. Could I ask what they are, sir?

It is always a pleasure to come to Bromley, and I hope I will be able to do so again with my hon. Friend in the future. We will make sure that Bromley benefits from around £2 million in transitional grants for each of the next two years. I know from looking at the representations that have been made by London boroughs that that will be a big help in helping them to manage the more difficult first two years of the settlement.

May I thank the Secretary of State for listening to the vocal representations from across Lincolnshire, including from my neighbour, my hon. Friend the Member for Louth and Horncastle (Victoria Atkins)? At those meetings, he heard that it is not just rurality but sparsity of population that is important. Will he confirm that the new, revised settlement takes those conditions into account and tell us what it means for Lincolnshire?

I will indeed. Lincolnshire is in a particularly ambitious phase of its history, and it is looking to negotiate a substantial devolution deal. As a rural and sparsely populated county, as he said, it faces particular pressures, so the additional funding it will receive is in the order of £5 million during the year ahead, and that will be widely welcomed across the county.

As it apparently falls to me to do the finale, I say well done and thank you to my right hon. Friend the Secretary of State. I and many colleagues from across the south-west and from rural constituencies lobbied pretty hard, and we thank him very much for listening. We await the final figures. He might well be able to provide the figure for North Devon shortly—if I speak slowly enough. [Interruption.] Marvellous. However, does he agree that it is important that we never again find ourselves in a position where rural areas face discrepancies and unfairness compared with urban areas?

I am very grateful to my hon. Friend. He may be last, but Devon is certainly not least—it is a very important part of the country. His patience is rewarded: the funding that Devon will receive from the Government next year is £8.4 million, which will make a big difference to his area. North Devon will receive around £250,000 for its district council services. The opportunity to take a long, hard look at the resources that areas have, the costs they incur and the demands they have on their services is long overdue. I know that my hon. Friend’s county and his district will play a full part in that review, and I dare say he will too.