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Local Government Finance (England)

Volume 605: debated on Wednesday 10 February 2016

[Relevant Documents: Oral evidence taken before the Communities and Local Government Committee on 13 January 2016, on the Financial Settlement 2015, HC 530, and written evidence to the Committee on Adult social care, reported to the House on 8 February 2016.]

We come now to the three motions on local government finance in England, which will be debated together. I remind the House that these motions will be subject to double majority voting. If Divisions are called on these motions, all Members of the House are able to vote in the Divisions. The motions will be agreed only if, of those voting, a majority of all Members and a majority of Members representing constituencies in England vote in support of the motions. At the end, the Tellers will report the results, first, for all Members and, secondly, for those representing constituencies in England.

I beg to move,

That the Report on Local Government Finance (England) 2016–17 (HC 789), which was laid before this House on 8 February, be approved.

With this we shall discuss the following motions:

That the Report on the Referendums Relating to Council Tax Increases (Principles) (England) 2016–17 (HC 790), which was laid before this House on 8 February, be approved.

That the Report on Referendums Relating to Council Tax Increases (Alternative Notional Amounts) (England) 2016–17 (HC 791), which was laid before this House on 8 February, be approved.

I am pleased to open the debate on this year’s report on local government finance in England. I would like to start by thanking all colleagues in the House, and council leaders and officials, who contributed to the consultation after I made a provisional statement shortly before Christmas. Nearly 280 groups or individuals contributed to the consultation. All responses have been carefully considered, and sensible suggestions have been incorporated into the final settlement that is before the House today.

I have always been frank with local councils that they will need to continue to make savings. Local government accounts for nearly one quarter of public spending, so it is inevitable and appropriate that councils should play their part in helping to reduce the national deficit. Council tax payers are also national tax payers; they are the same people—our constituents—and everyone suffers if we run a permanent, untamed deficit.

Councils have accepted their part in this responsibility. During the last Parliament, all parts of local government delivered the savings that have helped to reduce the deficit by half. At the same time, satisfaction with the services provided by local councils has been maintained—a remarkable reflection on the professionalism and the resourcefulness of local government.

Does the Secretary of State understand the frustration of my constituents at the settlement for Harrow Council? We have one of the lowest per capita settlements in London. The council is having to make £80 million of cuts over four years, leading among other things to the closure of the popular Bridge mental health day centre.

What I would say to the hon. Gentleman is that London Councils welcomed many of the changes we have made in this settlement, including the provision of a four-year settlement. One of the concerns councils have had for many years is that, with annual funding, they were not able to plan ahead and reap some of the economies.

The hon. Member for Harrow West (Mr Thomas) will also know that, in terms of the response to the provisional settlement, I have made extra resources available to Harrow, which I think has gone down well in his borough.

I thank my right hon. Friend not only for finding extra money for Lancashire, but for listening to me and not taking that money out of Blackpool’s budget. Blackpool is another urban area facing high levels of need. He has performed a balancing trick very adroitly.

I am grateful for what my hon. Friend has said. Blackpool has important pressures that need to be met, and he has made representations, as indeed have his local authorities. It is true that some advised that some transitional relief should come at the expense of places such as Blackpool. However, I have been able to find a way for us to provide some relief for the years in which the reductions in grant are sharpest, without making the situation worse for places such as Blackpool, which have benefited from the settlement.

This is actually a very progressive and good settlement for the long-term future of local government, because it is genuinely devolutionist. In that context, does my right hon. Friend recognise and accept that it is important not only that he has given transitional relief, which helps outer London boroughs such as Bromley, but that London boroughs and other authorities help themselves by reducing their unit costs in the same way as, for example, Bromley, which has the lowest unit costs in outer London?

My hon. Friend is absolutely right. I had the pleasure of spending some time with the cabinet of Bromley Council, which is one of the most efficient in London and shows the way for all London boroughs to deliver services that are very much valued by their residents, very cost-effectively.

On 26 January, the leader of Blackpool Council wrote to the Secretary of State to remind him that we face cuts for 2016-17 of 4.9% compared with an England average of 2.8%. Despite that—and despite the Secretary of State’s welcome comments yesterday about looking at the way in which demographics in certain areas, particularly those with large numbers of older people, might be dealt with—under this formula Blackpool gets absolutely no transitional relief at all. Is there any logic or justice in that?

Of course there is, because the transitional relief is for the authorities that had a sharper reduction in the grant than others. Blackpool benefited to the tune of £3 million from the improvement of the grant. My hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard) was wise enough to recognise that, and to recognise the difference it will make to the people of Blackpool, and the hon. Gentleman should do likewise.

One of the most progressive things that the Secretary of State has done is to give local councils a four-year settlement, so that they can now view what their settlements will be into the future and not live from day to day not knowing what their budget settlement would be in the next year.

My hon. Friend is right. This is one of the key requests that local government has made of central Government for many years, and it has constantly fallen on deaf ears. Councils right across the country, with all different kinds of party political control, have welcomed the fact that they will have the chance to look ahead and plan for the future.

Let me make a bit of progress, and then I will of course give way to more colleagues.

As the Institute for Fiscal Studies pointed out, over the course of this Parliament the required savings that, as I made clear, councils will need to continue to make will be less than those required in the previous Parliament. The Institute for Fiscal Studies reports that the required savings of

“around 7% in real terms over the next four a substantially slower pace of cuts than councils had to deliver between 2009-10 and 2015-16, when councils’ spending power was cut on average by 25% in real terms.”

Will my right hon. Friend confirm that within this process councils are still required to do things in a fundamentally different way, such as setting up trading joint ventures, as one county council told me it had done on Monday, or looking at Uber-type services for buses?

Yes, councils should take the opportunities to be innovative. My hon. Friend and I served on the Committee on the Bill that became the Localism Act 2011, which introduced a general power of competence for local councils precisely so that they could take decisions in the interests of their residents and contribute effectively.

Order. Before the Secretary of State gives way—he has been perfectly polite and courteous in giving way a great many times—let me point out that this is a short debate. Twenty-four people have indicated to me that they would like to make speeches, and they intend to sit here all afternoon awaiting their turn to do so. Many people are making interventions, which the Secretary of State is dealing with most courteously. They are taking part in the debate, and they must be aware that they are taking up the time of other people who will be waiting to speak later on. If you make an intervention in this debate, you must remain for most of the debate and certainly be here for the wind-ups.

Thank you very much, Madam Deputy Speaker. Given those numbers, I will be brief in taking interventions, but I will take the point from the hon. Member for Liverpool, Riverside.

I thank the Secretary of State. Does he recognise the problems of Liverpool, which faces a 9% cut in funding next year, coming on top of a 58% cut since 2010?

I have been very clear that all councils need to continue to make savings. As I think the hon. Lady will know, the way in which we have conducted the settlements has been fair across the country, as the Institute for Fiscal Studies pointed out. In fact, a council that she knows very well that is close to her area, Sefton Council, said in its response to the consultation:

“The announcement that core spending power will be reduced by only 0.5% between 2015/16 and 2019/20 in cash terms and 6.7% in real terms, is better than we had expected last summer.”

That is from her neighbouring council.

I welcome a review of the fair share for rural areas. The rural fair share campaign, which has been running for many years, is about making sure that funds keep coming across to help us deal with not only our elderly populations, but the things such as small schools and rubbish collections that cost so much more to provide in rural areas. We need a fair deal. I look forward to the Secretary of State’s keeping up his good work, but we want to see delivery.

My hon. Friend is absolutely right, and we could add to those services school transport, which is particularly costly in rural areas. That is why the underlying formula should catch up with what has happened in many communities. That is overdue.

I will highlight four features of this year’s settlement. First, for decades councils have had to set annual budgets without knowing what resources they can expect 12 months hence. That prevents them from planning long term, and it promotes inefficiency. Because plans and contracts have to be short term, councils miss out on the economies that would be possible if they could take a longer view. For the first time in the history of local government, the settlement gives indicative figures for the next four years to any council that shows that it can translate such certainty into efficiency savings.

There is a deep hole in the arrangements for the island. Can the Secretary of State work with locals, of all parties and of none, to find solutions to the problems that we face?

Indeed, and I pay tribute to my hon. Friend for the work that he does as MP for the Isle of Wight in bringing together all its leaders and councillors, regardless of party political affiliation, to promote its best interests. I look forward to visiting the island in his company to meet the councillors and officers.

My county of Staffordshire makes the transitional grant list at No. 18, with just £5.6 million. Next door to me, deprived Stoke-on-Trent gets nothing, against £24.1 million for Surrey. Why, in this battle of the S’s, does the south, as ever, win out?

It is very straightforward. The amount of transitional relief is in proportion to the reduction in revenue support grant, and so Staffordshire had less than Surrey. That is purely mathematical. I should have thought that the addition of nearly £3 million to the council’s budget would have been welcomed by council tax payers. In fact, I know that it has been.

As my right hon. Friend knows, I welcome the statement wholeheartedly. May I take him back to what he has said about certainty? That is welcome, from a district and county council perspective. Will he give further consideration over the coming weeks to providing certainty to town councils that they will be exempt from having their precept capped? They are trying to work in greater concert with district councils, and that parallel certainty will help them to forge such deals.

There is a lively debate as to whether the bigger town and parish councils should be part of the capping regime. I have resisted drawing them into that, but I look to parish and town councils to exercise economy, recognising that the services that they provide are much valued but that they are paid for by council tax payers. If those councils continue to operate in an economical way, they may not give rise to the question on which my hon. Friend seeks certainty.

I am going to make some progress, as you have urged me to do, Madam Deputy Speaker. If I have time towards the end, I will take an intervention from the right hon. Gentleman.

The second feature of the settlement is that we have prioritised spending on adult social care—the care that we provide to our elderly and vulnerable citizens. [Interruption.] Labour Members groan and complain, but they should recognise that in response to the requests of local government, the Government have done something that the previous Government did not and established funding arrangements to ensure that we can protect our elderly and vulnerable citizens.

In September, the Association of Directors of Adult Social Services and the Local Government Association made a submission to the spending review—“Adult social care, health and wellbeing: A Shared Commitment. 2015 Spending Review Submission”—in which the two organisations jointly requested that an extra £2.9 billion be made available by 2020. With the introduction of the 2% social care precept and £1.5 billion made available to councils through an improved better care fund, up to £3.5 billion of extra funding will be available for adult social care by 2019-20.

I will not give way.

More elderly people living in our communities is a good thing—they are our parents and grandparents, and it is an advance that they are living longer than anyone thought possible—but we need to pay for their care needs. It is no reflection on the efficiency of a council if care costs increase because the number of older people is increasing in their communities.

I will not give way.

A 2% precept is the equivalent of an annual £23 increase in the average bill for a band D property. That money can be used only for social care, and council tax bills are required to be transparent about the purpose for which the money is raised.

By the end of this Parliament, local government will retain all the business rates it raises. It is a huge transformation from a world in which, just three years ago, every penny that councils collected from local businesses had to be handed over straight to the Treasury. That meant that councils were dependent on the central Government grant. At the start of the last Parliament, nearly 80% of council expenditure was in the form of a grant from central Government. By 2020, all local government spending will be raised by local government. Councils and local people will reap the benefits of reviving economic growth, just as central Government and the country will benefit from the rising prosperity that the Government’s policies are fostering. With services financed locally, councils are even more accountable to their electorates, rather than to Ministers in Whitehall. Even as a Minister in Whitehall, I say that this is how it should be.

I am sorry, but the Secretary of State is being disingenuous. He knows that the whole local government finance system, set up under the previous Government’s Local Finance Act 2012, takes no account of need. His social care precept will raise the most money in areas that have the highest council tax base, not in areas where there is greatest need, which tend to have the lowest council tax base.

The hon. Lady makes two interesting points. On the first point, about the formula, I agree with her. It is too long since the underlying assessment of needs was updated—it is more than 10 years—and that is why I have proposed to go back to the drawing board and look at the needs and the resources available to each county. She is quite right on that point. On the second point, of course she is right: I recognise that the effect of a 2% precept is different in different parts of the country. The better care fund has been allocated differently precisely to take account of that. I would therefore have thought she welcomed that.

Does the Secretary of State recognise that councils that are progressive in supporting business and providing housing for their constituents will actually get a more generous income in future than those that do not support businesses coming into their area?

My hon. Friend is absolutely right. It is of course better for councils to face in the direction of bringing successful businesses into their area and benefiting from that, rather than passing all such benefits up to the Exchequer.

A few moments ago, I mentioned the increasing elderly population, but, as I said to the hon. Member for Warrington North (Helen Jones), we have had a decade of significant demographic change without the needs-based formula—it determines how much a well-run council requires to deliver its services efficiently—being revised to reflect that change.

The hon. Gentleman and the hon. Lady should be patient. I have given way to their hon. Friend, and I am going to make some progress.

That point was made repeatedly during the consultation by councils from all across the country and under the leadership of all political parties. That is why I will conduct a fundamental review of the needs-based formula to govern the change to 100% business rates retention, which I have described. It is not only the changing needs of different areas that need to be recognised, but the differing costs of providing services to residents depending on the area a council serves. As my hon. Friend the Member for Tiverton and Honiton (Neil Parish) was saying, the rural services delivery grant, which recognises the extra costs encountered by rural authorities in delivering services, is bringing £15.5 million into such councils this year. This settlement increases the grant more than fivefold to £80.5 million, which will ensure that there is no deterioration in Government funding for rural areas, when compared with urban areas, for the year of this statutory settlement.

The Secretary of State is being characteristically generous. However elegant the strategy, he must surely take a moment to look at the results. What Buckinghamshire gets from the Government will have been boosted by 11.4% by 2016-17, while Birmingham has been battered and is losing 10%. I welcome the shift to a needs-based formula, but surely he must see that massive discrepancies are emerging, when great cities such as Birmingham are being battered to bits.

The right hon. Gentleman is an intelligent man, so he should go away and study the changes in the formula. When I met the former leader of his city, Sir Albert Bore, he recognised, as has the Institute for Fiscal Studies, that it is fair to proceed with an approach that looks at all the resources that are available to local councils. On that basis, his city of Birmingham, for which I have enormous ambition and regard, has benefited significantly. Of course, the transitional grant is for places that did not benefit from the changes in the formula.

My right hon. Friend maintains a soft and genuine manner, which I admire, but I am made furious by the interventions by Labour Members, because when in power they skewed the whole system. They could not find a way to put the money into Labour areas without coming up with a falsehood. They put density into the formula at four times the weighting of sparsity, when there was no evidence whatsoever of any link between density and need. It was they who skewed the system, and it needs to be put right.

My hon. Friend is a passionate advocate and he makes his case very well. I think that all Members across the House would recognise that after 10 years it is appropriate to look again at the cost of providing services in different areas—rural as well as urban—and at the changes in demographic pressures in that time. That sensible approach has been welcomed widely.

Is it not true that the long-standing unfairness has been the penalty against rural areas? Areas such as Devon have a low-wage economy, but the highest council taxes. This settlement addresses that imbalance without penalising areas such as Torbay. I therefore congratulate my right hon. Friend on a very sensible settlement.

I am very grateful to my hon. Friend. Every local government finance settlement has to strike a balance between the very different needs of different areas of the country. Most people who have reflected on the settlement that I have proposed, including the Local Government Association and the Institute for Fiscal Studies, have recognised that I have been fair to places, such as those she mentions, that have higher costs—Torbay has benefited from the change in the formula—and that I have committed to making sure that the new system for 100% business rate retention is founded on an accepted analysis of the costs and pressures that different authorities face.

I am going to make some progress, but I will give way to the Chairman of the Communities and Local Government Committee in a few moments.

Another important provision of the settlement is the continuation of the new homes bonus. It had not been guaranteed that the existing scheme would continue through the spending review period. I believe that the bonus has been a valuable source of funding for councils and a spur to much-needed house building, so I am very happy that the scheme will continue, subject to the changes on which I am consulting.

The settlement provides flexibility for councils with a record of keeping costs low by permitting a de minimis £5 a year council tax increase without requiring the cost of a referendum. We will consult on plans to permit well-run planning departments to increase their fees by, at most, the rate of inflation, as long as such income is used to decrease the existing cross-subsidy of the planning function by other council tax payers. Importantly, the settlement makes it clear that as revenue support grant declines, no council will have to make a contribution to other councils in either 2017-18 or 2018-19—something that was considered to be unfair in the provisional settlement by certain respondents.

Let me say a few words about the reductions in revenue support grant over the spending review period. As I have said, we are moving from one world to another; from a world in which the Government grant accounted for nearly 80% of local government expenditure in 2010 to one in which, by 2020, only 5% of local government spending power will come from the revenue support grant. In the same period, with the implementation of 100% business rates retention, the proportion of council spending power from local sources—council tax and business rates—will grow.

The reason for the change is not just financial. A council that is almost entirely dependent on central Government will, consciously or unconsciously, end up looking to central Government to be told what to do. Of course, since time immemorial, Governments have attached strings to the money they give out. My excellent predecessor, my right hon. Friend the Member for Brentwood and Ongar (Sir Eric Pickles), abolished 4,700 targets, measures and indicators to which every council in the country had to subjugate itself to obtain revenue to provide services for its residents.

That is no way for the proud towns, cities, counties and districts of this country to be governed. Places, many with a history as long and distinctive as our country itself, should not be reduced to complying meekly with Whitehall’s presumptuous demands. That is why a shift to funding from the people and businesses that councils exist to represent and serve, rather than all eyes being fixed on London, is so vital.

Our councils have been the strongest campaigners for this long overdue change, but in the consultation period that followed the statement on the provisional settlement, councils and colleagues made the compelling case that the transition to this new world needs to be sensibly managed and that the first two years of the settlement would pose particular challenges.

I will give way in a second.

I agreed with those views, which is why I have ensured that the final settlement will include a transition fund worth £150 million a year to cover 2016-17 and 2017-18.

My right hon. Friend spoke about Government attaching strings to their funding. It was a version of he who pays the piper calls the tune. Does he believe that we might be moving to a world that is much more democratically responsive not only to the local electorate, but to businesses? They have often felt neglected by their local council areas and they will now feel that they are rather more important and have a starring role.

My hon. Friend is right. It was a ludicrous situation, whereby local councils levied business rates, collected them and sent them to the Treasury. Local businesses felt that they did not have the same direct connection as council tax payers with their local councils. The best run councils have always had a high regard for promoting business in their areas, and it is high time that they were rewarded and backed for that. The reforms do that.

As the Secretary of State knows, I agree with the proposition that it is important that councils can raise more of their finance locally. It is not a question of whether, but how it should be done. A crucial element is the needs assessment review, which will set the basis for the new system of 100% business rates retention for the future. How does the Secretary of State intend to go about that? Will he fully involve the Local Government Association? Will he consider any independent element to the review to ensure that it is not seen as some sort of stitch-up by Government Members to look after their areas and ignore areas represented by Opposition Members?

The hon. Gentleman has known me long enough to realise that, when I approach something, I do it seriously and rigorously. I take representations from everyone who has a sensible view to contribute, and I will certainly do that from local governments of all types. I hope that the hon. Gentleman and members of his Select Committee will contribute, as well as hon. Members of all parties who have a great deal of experience and knowledge of their constituents’ needs.

Under the proposed settlement, no council will receive less than was stated in the provisional settlement figures. However, the transition fund will ease the change from a system based on central Government grant to one in which local sources determine a council’s revenue. The fund will be applied in direct proportion to the difference in the revenue support grant that would have been experienced. It is as straightforward as that, whatever the Labour party’s conspiracy theories suggest. Indeed, some Labour-led authorities, including Lancashire, made the proposal. The transition fund will ease the pace of reductions in the first two years of the spending review period, after which income from other sources will grow.

The local government financial settlement is always important. It is the statutory act that allows councils to set their legal budget for the year ahead—the budget to deliver the services that we and our constituents rely on. This year the settlement contains some particularly important changes: indicative budgets for the entire spending review period to make longer-term planning a reality; a big increase in funding for adult social care, which is one of our councils’ most important responsibilities; action to help rural areas and a commitment to all councils that the move to 100% business rate retention will be accompanied by a fundamental review of the needs-based formula; and transition funding to smooth the long-overdue journey from our over-centralised state to a future where all money that is spent locally is generated locally.

Multi-year budgets have been delivered, social care prioritised, rural needs acknowledged, a fair funding review launched, and the devolution of funding advanced, and I commend the motion to the House.

Order. Before I call the Opposition Front-Bench speaker, it will be obvious to the House that a great many people wish to speak and we have a limited amount of time. I therefore impose a five-minute time limit on Back-Bench speeches, although not for Mr Steve Reed.

I will do my best to keep my remarks brief.

It is always a pleasure to listen to the Secretary of State’s engaging manner, but it is not so pleasant listening to what he has to say. He repeated his claims to have protected funding for councils over the next four years, but there can be no one left who believes that anymore—judging from what we have heard over recent weeks, not even his own MPs believe it. That is no wonder, because the settlement funding assessment takes away £1 in every £3 given to councils for funding core services, and that is on top of cuts in excess of 40%—indeed, in many councils, in excess of 50%—that have already been imposed.

I tried to intervene on the Secretary of State and he would not take my intervention, but I cannot leave what he said about social care because it is just wrong. There is no injection of cash into social care; there is only a maximum of £400 million this year. That funding is uncertain, risky and back-loaded, and the LGA has asked him if he will inject £700 million over the next two years because it is so concerned. There was not even funding for its own policy of national living wage increases, so let us not hear such things about social care.

My hon. Friend is absolutely right, and I will pick up on those points later in my contribution. Returning to the settlement funding assessment, because increases elsewhere do not plug the gap that those cuts create, it will result in cuts to front-line services, including cuts to youth services, fixing potholes, cleaning the streets, emptying the bins, looking after parks, keeping the street lights on at night, Sure Start centres, libraries, museums and rural bus services. The Secretary of State has not protected any of those; he has sharpened the knife.

Councils such as Coventry will lose 60% of their income from grants over a 10-year period—that is £80 million—which will inflict unnecessary hardship. The Secretary of State talks about business rates, but it was a previous Conservative Government who changed those in the first place. He is now passing the buck of paying for the police and social care on to local authorities, and three or four years down the line, he will do what Ministers always do and come in and cap it.

My hon. Friend is right, and devolving the blame for their cuts is part of what the Government are up to with this settlement.

Some funding for social care has been handed over to councils, which certainly sounds welcome. According to the Tory-led Local Government Association, however, the Government have handed over a £1 billion funding black hole. They have told councils to impose a 2% council tax rise every year for four years to plug that gap, but even that does not raise anywhere near enough to pay for the care that older people need. That increase raises the least money in the poorest areas that most need the funding. The Government have cut the funding then handed it over to councils to take the blame.

That is exactly the problem Tameside Metropolitan Borough Council finds itself with. This year, it has a £16 million social care deficit. Raising 2% on council tax—based on 100% collection, which is not going to happen—will bring in £1.4 million. The sums do not add up.

I am grateful to my hon. Friend for making a very graphic illustration of the point I was making.

What this all means is denying vulnerable older and disabled people the home care they need. It means turning away frail, older people who cannot clean their own homes or cook their own food. It means closing down day care centres. It means cutting back on home care visits. It means leaving people stuck in hospital beds because they have no support to go to at home, with the knock-on effect of lengthening hospital waiting times for other patients.

Does my hon. Friend not think it bizarre that the Secretary of State should be trumpeting his reviews for the future for elderly people in places such as Blackpool, where we have a larger than average number of elderly and disabled people, but he is not prepared to identify the really savage cuts to adult social care in Blackpool, which is leading exactly to the sort of situation my hon. Friend describes?

What is really worrying is that the Secretary of State does not seem to understand what is really going on in councils and in public services across the country.

Even Tory MPs were terrified of what voters would make of all this, and they threatened to vote it down. On Monday this week, the Secretary of State came to the Chamber with a fix to head off the rebellion. He announced he had found £300 million down the back of a sofa—he would not tell us where it had come from—and then handed nearly all of it to the wealthiest Tory councils as a sweetener just weeks before the council elections. Some 85% of the money will go to Tory-run areas and barely 5% to Labour-run areas, despite the fact that those Labour areas have suffered far bigger cuts since 2010. Whatever happened to the one nation Tories? What about the northern powerhouse? If the word gerrymander did not already exist, we would have to invent it to describe a fix like this.

The hon. Gentleman is making a powerful speech, but I think that it is factually incorrect. As he will know, rural areas tend to have the oldest populations, yet when this Prime Minister came to power, there was a 50% premium going to urban councils with much younger populations. Whatever the future might have held for them, they were not old then and they did not have the need. Rural areas did and his party did absolutely nothing.

We need a funding formula that is based on need. The Tories have had six years to give us that and they clearly have not done it.

Birmingham has been hit by the biggest cuts in local government history, with cuts of £90 million next year. The city put a powerful case for a fair deal and transitional funding. How can it be right that Birmingham got not one penny in transitional funding, but Surrey got £12 million and Cheshire East, in the Chancellor of the Exchequer’s constituency, got £3 million? It is simply not fair.

My hon. Friend makes an important point. Actually, Surrey got more than £12 million. Surrey, which of course is where the Secretary of State just happens to be an MP, gets the most of any council. [Interruption.] The council next door to where the right hon. Gentleman happens to be an MP gets the most, with £24 million. Hampshire gets £19 million, Hertfordshire gets £14 million and the Prime Minister’s campaigning mum—admirable woman that she is—will be very pleased to see that Oxfordshire gets £9 million.

I am not criticising what those councils are getting. They did not deserve the scale of the cuts the Government had lined up for them, but then neither do Middlesbrough, Knowsley, Hull, Liverpool, Manchester, Birmingham, Darlington and all the other more deprived areas that have suffered far deeper cuts in the past six years but have been offered absolutely no help whatever.

I suggest gently to the hon. Gentleman that if he aspires to be a Local Government Minister, a little geography might help. He is welcome to come to Tunbridge Wells. I would be happy to show him that delightful place. Since we are talking about geography, I am sure he is familiar with Durham County Council. In its submission to the consultation, it said:

“In our view, no authority can now claim that this approach is ‘unfair’”.

Does the hon. Gentleman agree?

I spoke to at least 20 or 30 council leaders over the weekend, at the Labour party’s local government conference, and not a single one thought the right hon. Gentleman’s approach was fair, and I am afraid that leaders of Tory councils agree with me, not him.

I have absolutely no idea what the Secretary of State was saying or where he got it from. According to headlines in our local paper, the funding settlement for Durham has been slammed as unfair by the leader of the council.

Order. The hon. Member for Croydon North (Mr Reed) has to answer, and then he can give way to the Secretary of State.

The hon. Member for City of Durham (Dr Blackman-Woods) asked a very reasonable question. The quote came from a document headed: “Durham County Council response to the 2016/17 Local Government Finance Settlement Consultation.” It states:

“The new approach is fairer and should never be reversed.”

That is a misinterpretation of what Labour council leaders are saying. However much the Conservatives think this pre-council elections sweetener will work, the Rural Services Network is clear that this political bung will not change the dire financial crisis facing even rural councils over the next four years.

Has my hon. Friend had any indication from the leaders of metropolitan councils whether they think the new arrangements are fair? As I understand it, only three metropolitan councils will get any of the transitional funding, and two of them happen to be Trafford and Solihull—the only two Conservative metropolitan districts.

Over the weekend, I spoke to the leaders of Manchester and Newcastle upon Tyne, the deputy mayor of Liverpool and the leader of Leeds City Council. All of them believe that the Government’s actions are devastating local services.

No, I will not give way again. I will continue.

Some areas represented by Tory MPs, such as Stockton on Tees and Nuneaton, get nothing from the additional money. Those MPs need to ask themselves what their voters will think of MPs who vote for deep cuts and council tax rises for their own areas but throw millions at wealthier areas such as Tunbridge Wells.

I have given way to the Secretary of State twice, and now I am going to continue.

I turn now to council tax. On Monday, the Secretary of State denied he had written to councils, telling them to put up council tax. Indeed, it was not the Secretary of State who wrote that; it was the Under-Secretary of State for Communities and Local Government, the hon. Member for Nuneaton (Mr Jones). [Interruption.]

Order. The House is making far too much noise. Both the hon. Gentleman and the Secretary of State have important things to say. Let them fight it out. Do not make so much noise.

Barracking will not stop me saying what needs to be said.

I have a copy of the letter the Minister sent to councils with the provisional settlement. The spreadsheets it links to, which were sent to every town hall, include figures setting out the Government’s expectation that councils will put up council tax by 1.75% every year for four years and, on top of that, impose a further 2% rise to help plug the gap arising from the Government’s failure to fund social care properly. That is 3.75% a year more every year for four years. By 2020, it adds up to a council tax hike of well over 20%. That will cost the average band E council tax payer about £300 more a year. It is very hard indeed to square that massive Tory tax hike with the Tory manifesto pledge to keep council tax as low as possible. The Tories are breaking their promises—they are hiking council tax up.

My hon. Friend is making a very important point about council tax. During his statement earlier this week, the Secretary of State failed to understand that different councils have different council tax bases, and he told me to go away and speak to Trafford Council about how it is managing its affairs. There is a 27.4% difference between the council tax bases of Tameside and Trafford. Does my hon. Friend agree that such a difference is inherent in the unfairness under discussion?

That is one of the many ways in which this settlement is deeply unfair to communities up and down the country.

The situation regarding transitional help is even worse than my hon. Friend has described. The west midlands, Newcastle-under-Lyme, Stoke-on-Trent and Birmingham will all get nothing, but already well-rewarded Conservative counties and districts in the south, including St Albans, Sevenoaks and Surrey Heath—those are names to conjure with—are going to benefit. Does my hon. Friend think that that is right or fair?

The figures speak for themselves: 85% to Tory councils and 5% to Labour councils. Everyone listening to this debate knows precisely what the Government are up to.

Turning back to the council tax rises that will be imposed over the next five years, what will people get for all the extra money the Tories will take off them? Will their streets will be swept more often? Will their bins be emptied more regularly? Will their library be saved, or will older people be looked after properly? No, because the Government have cut council funding so hard that the extra money they will take off people will not make up for what the Chancellor has cut.

Taxpayers will pay more, but they will get less in return. That is Tory value for money—tax hikes and service cuts, picking people’s pockets, while damaging the quality of life of every community up and down this country. That is the story of this funding settlement, which is why every Member should vote against it this evening: a 20% council tax hike designed in Downing Street; services cut to the bone; and £300 million hurled at a handful of wealthier areas in a desperate bid to buy off a Tory Back-Bench rebellion. People pay more but get less from these tax-hiking, pledge-breaking, self-serving Tories.

It costs more to deliver public services on an island with no link to the mainland. For instance, in the event of a major emergency, we cannot get help from the mainland fire services in less than an hour, so capability must be maintained to a higher level, to secure the safety of islanders and their visitors. That is just one example of the extra costs. There are many others, which have never been properly recognised in successive local government funding formulae.

Back in 2002, the Isle of Wight was set to lose the additional costs allowance. The island was counted in with much more affluent Hampshire. The then Labour Government decided to change the rules, resulting in the island being too small to qualify for the ACA on its own. The former leader of the Liberal council, Shirley Smart, and I had to explain why the council could not manage without it.

The Elliott review—a major study of local government finance—was published in 1996. Professor Elliott recommended that further research was needed on disparities in non-labour costs for only two councils, namely those of the Isle of Wight and the Isles of Scilly. That research has not been carried out. Nick Raynsford, the then Minister for Local and Regional Government, eventually agreed that we would continue to receive the ACA. The extra cost of delivering services on an island was not specifically recognised, but we none the less continued to receive the £3 million or so a year.

Over the years, the method of funding local government has changed, but the benefits of the island getting the ACA remained somewhat buried in the unfathomable formulae that made up the annual settlements, although I am told that the value decreases over the years. When the move away from the Government grant to local funding was announced, it became clear that this would make the difficulties of the Isle of Wight Council even more difficult and even more severe. Indeed, the council could not find a way to carry on beyond this year. For the first time in many years, the Isle of Wight Council asked me to assist it to achieve a number of specific sensible proposals that would help it to change.

The announcements made on Monday did not help the island quite simply because our issues are unique—something that the Secretary of State and even the Prime Minister have recognised. We do not qualify for transitional help because the settlement based on the existing formulae did not disadvantage us. It was the formula itself that disadvantaged us. We do not qualify for the rural sparsity grant because people cannot live very far from a town on an island only 23 miles by 13 miles.

With the announcement that there was to be a fair funding review, I realised that my Front-Bench team recognised that some problems were unresolved even by the revised settlement. If we can get the real costs of delivering services on an island recognised, we will find a long-term solution to a very long-term problem—but we still have the problem of getting to the review. The future of the Isle of Wight Council beyond this year was not secure. Money is in short supply, but when there is not so much of it to go around, resources must be shared most fully.

I am grateful for the discussions with my right hon. Friend the Secretary of State about this problem, and I thank him for his offer to visit the island to find the necessary flexibilities for the council to find a way through the challenges until a fair funding settlement can be put in place.

I will be honest: I had initially decided to vote against the settlement this afternoon. Based on our discussions, however, I will support the Government this year—I say again, this year. I trust my right hon. Friends to deliver on these proposals over the coming months. I am very proud that this Conservative Government are doing what was not done over the past 10 years. I look forward to working with the Government, and on a cross-party basis on the island, for the benefit of the Isle of Wight and all its islanders.

I want to try to be fair and even-handed in these matters, and I shall focus on the positive elements first. We ought to welcome the four-year settlement on offer, as it is something that local government has for some time been asking for. It is a helpful step forward, providing greater certainty for the future. We are not quite sure yet what efficiency plans local councils will need to draw up to achieve it, but it seems a good starting point.

I welcome the money for social care, too. It is reasonable, but I have some questions about how it is going to work. I have had an exchange of correspondence with the Secretary of State and with the Local Government Association. The LGA clearly says that it asked for more money than it has got on transformational spending and it states that this was not recognised.

I do not object to the fact—indeed, I welcome it—that local councils will be able to raise more money through council tax. It is right in principle for more local services to be paid for by local taxes. As a localist, I firmly believe in that.

Let me clarify the questions that still need addressing. First, the better care fund that is part of the package is very much back-end loaded in the spending settlement, but there are pressures at the front end, too. The Secretary of State claimed in his statement that the issue of the 2% council tax increase raising more money in richer areas would be addressed through the distribution of the better care fund. Will he put some clear information in the Library to explain how that is going to be done?

My hon. Friend has raised a key issue. For two years, there will be hardly anything from the better care fund. There will a maximum of only £400 million this year from the 2% precept, nothing from the better care fund, and only £105 million from the fund next year. The funding gap is increasing by £700 million, and the Local Government Association’s Councillor Izzi Seccombe has asked for that sum to be released.

That was the next point that I was going to make. The Government should consider how the better care fund money could be distributed in a way that would help more poor authorities, but it would also be helpful—I know that the LGA has mentioned this—if more of that money could be provided until at least 2017-18, if not into the next financial year. I hope that the Secretary of State will consider that, because current back-end loading is a real problem.

The LGA has drawn my attention to the fact that the council tax base—which relates to the number of properties from which council tax will be raised—is assumed to rise by 7.8%. Will the Government explain precisely how they have made that calculation? It seems a very big increase indeed.

What account have the Government taken of the ability of clinical commissioning groups to help local authorities with their social care spending? In my own authority of Sheffield, the CCG has said that it faces a substantial reduction in its funding against the anticipated level for next year, but this year it is providing the council with £9 million of transfer funding to help it with its added social care provision. If that money is removed, any element from the better care fund or increased council tax will not be a substitute. I think that that is an issue for cross-departmental work.

The settlement will clearly result in cuts. The Secretary of State will argue that they will be less severe than those made in the last Parliament, but, of course, they are in addition to those that have already been made. In the last Parliament, when most of the larger percentage cuts were made in the metropolitan areas, which had the greatest needs and the greatest problems, we never once heard mention of a transitional arrangement to provide extra help for those councils. It has only come about now because the Government have developed a core spending power which includes council tax, and the richer councils happen to be more able to raise council tax. As they have suffered a bigger reduction in revenue support grant as a result of the initial spending announcement, a transitional funding arrangement has suddenly and magically been put in place for them.

I think that, uncharacteristically, the hon. Gentleman’s memory is letting him down. He should recall that, in the last Parliament, there was a series of tariffs and top-ups to stop the bigger cuts being made. That money was top-sliced from the settlement. What I have now been able to do—and this was recommended by many authorities, including Labour authorities—is bring in new money from outside the settlement, and the hon. Gentleman should welcome that.

I think that in the last Parliament there was a series of ceilings and safety nets, which is traditional in the operation of local government finance. I do not remember any occasion on which it was reported to the House, after the initial settlement, that extra money had been found to help metropolitan Labour councils that were suffering major cuts.

What will happen when the transitional funding comes to an end after the first two years of the settlement? Will the money be found from somewhere else, or will it be absorbed into the new review of needs? The Secretary of State announced that towards the end of the settlement he would effectively end the arrangement for negative revenue support grant, which affected some authorities. Which councils will pay for that, or will the money be found, again, from outside?

The way in which the needs assessment review is carried out is absolutely crucial. The Secretary of State has promised to involve the Select Committee and the LGA. Will he consider introducing an independent element at the outset? Perhaps initial assessments could be carried out by a body such as the Office for Budget Responsibility or the Institute for Fiscal Studies, on a politically neutral basis.

How can we begin to assess this process when we do not know the details of many of the other grants? When, for example, will the public health grant be announced, so that authorities know what they have to spend in that regard?

Let me return to the subject of my own authority in Sheffield. Its spending power is to be cut by 4.3%, which is more than the national average of 2.8%. There is also to be a £25 million cut in its revenue support grant. The reality for Sheffield is another £50 million of cuts in services: cuts in rate support grant plus extra spending needs coming on stream will mean a £50 million cut in services.

This is a very challenging settlement, even for an efficient council such as Sheffield, of which we can be proud. Indeed, we can be proud of the whole of local government for the way in which it has dealt with very challenging spending settlements over a number of years. It has dealt with them in a very efficient way—better than central Government, by and large. However, the cuts that local government is now facing are on top of the cuts it has already had, and they are eventually going to mean more library closures, more run-down parks and a whole number of worsening services.

As Chair of the Select Committee, I want to end on a positive note. The Committee as a whole has said that we want to work closely with the Secretary of State when the new funding arrangements for the 100% retention of business rates are implemented at the end of this Parliament, to ensure that those arrangements are put in place in the best possible way.

Like many other hon. Members, I cut my teeth in politics in local government: I was elected to Cornwall Council in 2009. It is partly because of that that I simply do not recognise the rhetoric that we continually hear from Labour Members that this Government are somehow seeking to undermine, dismantle or even destroy local government. That rhetoric just does not stand up to scrutiny, because this Government are delivering the changes that local government has been asking for over many years.

At the heart of this matter is devolution. We are devolving real powers to cities and regions up and down the country. We are seeing this in Cornwall, where we are delivering an historic devolution deal. Cornwall is the first rural area to get a devolution deal. The people of Cornwall have been asking for such a deal for many years, and it is this Government who are delivering it. So Labour’s suggestion that we do not believe in local government just does not stand up to scrutiny. Why would we give more powers to local government if we did not believe in it and trust it to deliver its services?

I do not think that anybody on the Opposition Benches is saying that. It is surprising, however, to find that in devolved Greater Manchester, only one council, Trafford, is benefiting from the transitional funds—

Indeed; Tory Trafford. I was a councillor in Trafford, by the way, and I have to tell the Secretary of State that the council leader is not called Stephen Anstee; he is called Sean Anstee. The right hon. Gentleman has referred to him twice this week as Stephen—

My point is that picking out one local authority among the 10 and giving it such largesse hardly helps the devolution plans.

Order. Before the hon. Gentleman responds to that intervention, I have to tell the hon. Member for Worsley and Eccles South (Barbara Keeley) that it was far too long. We have hardly any time, and if hon. Members make long interventions they are preventing their colleagues from speaking.

I thank my hon. Friend for giving way. I do not know why the hon. Member for Worsley and Eccles South (Barbara Keeley) is confused. I know Sean Anstee very well, and I have never been in any doubt as to his name.

I want to address the point about the transitional grant. I am happy to place on record that, as of Monday morning, I was one of the Conservative Members who would have been prepared to walk through the No Lobby this evening and vote against the Government. That was because the proposed settlement was unfair to rural areas. It would have widened the gap in Government funding between rural and urban areas. I campaigned passionately during the election to stand up for Cornwall as a rural area and to seek a fairer funding deal for it, and I was not prepared to support the proposed settlement.

It is a well-established fact that rural areas have had the raw end of the deal from central Government for decades, despite having some of the highest levels of deprivation in the country and a growing ageing population, with all the increased pressure that that places on the delivery of services and the increased demand that it creates, not to mention the additional challenges and costs of delivering those services in a rural setting. Yet places such as Cornwall have had to accept lower levels of funding for many years, not just for our local government, but for things such as our schools and police. I am proud that this Government, under the leadership of my right hon. Friend the Prime Minister, have started to address that issue—it has been going on too long. We have started to see extra money put into our schools and, through the rural services delivery grant, we have begun to close the gap in local authority funding.

When I looked at what was being proposed in the settlement, I was therefore disappointed to find that it would have widened that gap and started to undo much of the good work the Government have already begun. I could not have supported a financial settlement that was going to make an unfair system even more unfair to rural areas. If I had gone through the No Lobby tonight, it would have been my first rebellion against the Government. As someone who has a slightly inherent rebellious streak in their nature, I am slightly disappointed that my rebellion will have to wait for another occasion.

I am delighted to say that the Secretary of State has listened to the many voices from across the House from rural areas who highlighted that what was being proposed was simply unacceptable to rural areas. I want to place on the record my thanks to him for the way he has conducted this consultation. He met me, as well as my Cornish colleagues and MPs from many areas, and he listened to our concerns. I am not sure I am going to go as far as my hon. Friend the Member for North Dorset (Simon Hoare), who is no longer in his place, and offer a wet kiss, but I want to place on the record my great gratitude for the way in which the Secretary of State has listened to our concerns and come forward with proposals that address them.

I am sure the hon. Gentleman will have detected that the vast majority of north-east councils, save for Northumberland, will get nothing from the transitional fund. The argument he appears to be confirming in his speech is that the decisions taken by the Secretary of State to grant transitional funding are based on staving off a Conservative rebellion, rather than on actually giving the funding to local authorities that need it the most.

I thank the hon. Lady for her intervention, but this is simply about the case that was made about rural constituencies, where the funding was going to widen the gap we had begun to close. That was the issue at stake. I am delighted that not only have funds been made available through this transitional grant to make sure that that gap does not get any wider, but, probably more importantly, we have the promise of a comprehensive review of the cost of delivering services. That gives us the opportunity to establish that it costs more to deliver services in rural areas than in urban areas.

My hon. Friend is right about the fundamental needs reassessment and he is right to congratulate the Secretary of State, but does he share my disappointment that, repeatedly in January, the Opposition spokesman refused to sign up to closing the gap?

I could not agree more with my hon. Friend. We need to address this issue, and this review gives us the opportunity we have asked for, time and again, to establish the true cost. Tonight, I will therefore be happy to support the Government on this motion.

Liverpool is one of the most deprived local authority areas. It is also entrepreneurial and outward-looking, always ready to adapt to new circumstances and welcoming innovation. Despite the valiant efforts of Mayor Joe Anderson and his hard-working councillors, it is not possible to protect the people of Liverpool against the cuts from this Government—cuts of 58% up to now, with an additional 9% cut in funding for next year. Indeed, that cut might be even bigger, because the council still does not know how much money will be available for two crucial services—I am referring to the public health grant and the independent living fund. Both those vital funds are important for the wellbeing of the people of Liverpool, and we still have no final figure on how much money will be available there.

In my short contribution tonight, I want to focus on the growing crisis in adult social care. Adult social care in Liverpool has already suffered a £90 million cut as a result of Government actions. We have been told that the new precept, the new tax to be levied on the people of Liverpool, and the Better Care Fund will resolve that situation. When we look at the facts, we can see that those two measures together will deliver £2.9 million next year, but there is already a need for an additional £15.2 million to cover the implementation of the national living wage and the demographic changes resulting from the rise in the number of elderly people in Liverpool. That means that the measures that we have been told will solve the problem will do very little indeed next year.

The council is not standing still and simply wringing its hands. It has been trying to develop innovative ways of working. It is talking to the local health authority—the clinical commissioning group—to see how it can work better with them to produce support services, but there is no way that the funding gap can be plugged next year. There will be more disastrous cuts for very vulnerable people in Liverpool. I am already hearing, day after day, from individuals—they are often people suffering severe disabilities who are trying very hard to live a normal life—who have been told that their care packages will be cut because, despite the council’s best efforts, the funding for those packages is being significantly reduced.

Does my hon. Friend agree that the Government must look at bringing forward to this year the additional funding that they promised from the better care fund, so that there is not a gap, and so that the council at least gets some extra money to support vulnerable, elderly and disabled people?

I certainly agree with my hon. Friend. In the case of Liverpool, it is possible that there could be some help in future years, but the figure that has been put forward at the moment is purely an indicative one. The council does not know what will be available in the future.

It is also important to recognise the very low tax base of a place such as Liverpool. Some 78% of its properties are in bands A and B, making the potential of the council to raise funds locally very difficult indeed.

I am acutely aware that there have been problems across all public services in Liverpool, because of consecutive years of Government cuts, including what is to come next year. I know that the council has done its best to protect people from those cuts. I have focused on adult social care, because that affects the people who are most in need. I go back to the comments that I made earlier about the council not knowing how much money will be available in the independent living fund. That is also about supporting people who need help the most.

My concern is that, unless the Government act now, more and more people will face crises and more and more people will suffer great hardships. Those people who are striving hard to live a normal life will find that the rug is cut away from underneath their feet. That is intolerable, and I ask the Government and the Secretary of State to revisit this area now, to look again at the provision of adult social care in Liverpool and in other areas of need and to take action so that more and more people do not suffer in this unacceptable way.

This is a particularly important local government finance settlement debate. In the past, we have tended to have debates where we are essentially rolling forward, year on year, much of the same. The difference this year—and it is very much to the credit of the Secretary of State—is that the settlement is genuinely transformational, as it moves away from what was essentially a flawed system. That is why this is so important.

There were two flaws in the system. First, it did nothing to take account of efficiency. The efficient authority gained nothing; everything was predicated on demonstrating—in certain parameters in the formula—need. It almost entrenched dependency, which drove out innovation and initiative. Now the Government have put in place a raft of measures that enable local authorities to say not “How much do we need?”, but “How do we change our own circumstances? How do we grow our rate base?”

The work that has been done through the Localism Act 2011, the power of general competence and the ability of local authorities such as Bromley to enter into commercial partnerships as landowners and investors with their business community has all changed the landscape. The ability to go for genuine growth, but in sensible terms, changes things. It is sad that we have seen such an old-fashioned and almost demeaning approach to local government from Labour. That is the first and most important point I wish to make.

The second important point is that the new approach moves away from an idea that central Government must sort out local government’s problems all the time. We are putting powers back into the hands of local authorities and doing so with a measure of fairness. The important thing is that there has been a transition. Because it was transformational, it was necessary to ease that move from a dependency culture to a self-sufficiency culture. That is utterly to the good. Now we need to make sure that as we go forward, we get the proper baselines right.

In Redcar and Cleveland we have lost 3,000 jobs at the steelworks, which is the equivalent of £10 million per year in business rates. In London that would be the equivalent of 176,000 jobs going overnight. Does the hon. Gentleman not recognise that there are differences that mean that councils have to respond in different ways to their economic circumstances?

Yes, of course. That is precisely why the Government set up the local enterprise partnerships, and why under the previous regime we set up the arrangements for top-ups and tariffs, which I hope we can simplify in future.

The simplistic idea that we cannot be, to some degree, masters of our own destiny is wrong. In particular, what seems to me utterly wrong is that a local authority such as Bromley, which has historically had the lowest unit costs per head in London, was treated on a formulaic basis in exactly the same way as local authorities that had never bothered to keep their unit costs down and which were never, therefore, driven by efficiency in the same way as we were. Once, when I commented that there was no reward for efficiency in the formula, I was told by a civil servant, “Well, Minister, surely efficiency is its own reward.” He did not grasp the concept. I am glad to say now that Ministers and officials in the Department for Communities and Local Government do grasp the concept, which should be fundamental to the way we go forward.

I welcome what has been done for Bromley, but more importantly, I ask the Secretary of State to ensure that we take forward those basic principles to the next degree so that when we get to the calculation of the needs element, I hope we will remember that there are more than simply the old-fashioned demographic trends in what constitutes needs. As has been observed, the way that needs were calculated in the past, for example, took a simplistic weighting of density as equating with deprivation. That was not the case at all. The way that both inner London and outer London have changed demonstrates that clearly.

I had better not because I need to save time.

Very often, the greatest driver of adult social care is not purely deprivation; it is age profile, as much as anything else. We need to build that sort of thing into the equation. We also need to make sure that where local authorities—

I am sorry. I have been generous and time is short.

We need to make sure, going forward, that where local authorities can demonstrate long-term efficiency and a record of reinvesting in improved services, that is given as much weighting in the calculation of a formula as a purely formulaic needs ratio matrix that has been established in the past. That will drive behavioural change. Those of us who call ourselves localists want to give local authorities the tools, the means and the incentive to change behaviour and to be more efficient and more self-reliant. We are part-way down the track on that.

The return of business rates to the localities is a huge step forward. It was an error that my party made in government, but we have rectified it and that is a good thing. The next step that I hope the Secretary of State will take in the succeeding years of this settlement is to entrench efficiency as something that should be rewarded, just as much as ticking boxes on the needs indices are. Then we will get genuine fairness in local government, something that is genuinely responsive to local needs, and gives local representatives the ability to shape their policies and financing to the needs, concerns and aspirations of their communities. If we achieve that, this settlement will be worth a very great deal indeed. I commend it to the House.

I refer Members to my entry in the Register of Members’ Financial Interests. I am a serving councillor on Oldham Metropolitan Borough Council.

I pay tribute to councillors up and down the land for the fantastic work they do in delivering excellent public services right across the communities we are here to serve. Time after time, residents say that they trust local government far more than central Government. Review after review has concluded that local government is the most efficient arm of government—far more efficient than any central Government Department.

However, the term “lions led by donkeys” could not be more apt than when we look at the relationship between central Government and local councillors, who are the frontline in delivering services and often the last line of defence for the communities they are there to serve. For far too long, local government has been subjected to the whims and follies of Ministers who use critical public services as a plaything—as a toy.

In central Government’s armoury, cash is the weapon of choice. As a councillor for 12 years, and as a former council leader representing a community of 250,000 people, I have witnessed and, indeed, implemented settlements passed down by this Government. As demand for support increased, money was taken away, as the link between need and the available cash was being broken.

The Government were warned time and time again that removing money from prevention would only shunt costs on to other parts of government. That is why, for almost every pound taken from local councils in Greater Manchester, the same amount has been shunted across to welfare and health, because the pressures just get moved around the system. That makes things worse for the people we represent, and it saves the Government no money whatever.

Is my hon. Friend aware that the cost of delayed discharges from hospital is almost £1 billion a year? That could buy more than 40,000 elderly people a full year of home care. How does that make moral or economic sense?

I absolutely agree. The better care fund had a mechanism for putting money at the frontline to make savings further down the line, but it was completely inadequate for the needs that were there.

The Chartered Institute of Public Finance and Accountancy has placed on record its view that some councils could well fall over. The challenge, of course, will not come from one lone council failing to set a budget; it will come in the courts. As entitlement to basic services such as children’s services, education and social care are taken away, somebody will test that entitlement in court. When the judgment is that their entitlement has unlawfully been taken away, that will send a shockwave through the system that central Government are not fully ready for. At that point, the system may well fall over.

The truth is that the Government do not want to be honest about the true cost of cuts. Most people will accept that adult social care is one of the biggest challenges facing local government and society more generally. Our older population grew by 11.4% between 2010 and 2014, while core funding was being taken away. Age UK estimates that more than 1 million people have unmet care demands. What is the Government’s response? It is lacklustre, weak and pathetic; it simply does not address the social care crisis in this country today.

My hon. Friend is perfectly right to quote those figures from Age UK for unmet care demands, but the need to meet those demands falls on unpaid family carers. The Government passed the Health and Social Care Act 2012, which gave carers rights, but there is no funding for that. That is what legislation will have to address.

I thank my hon. Friend. We can talk about figures, and this is a debate about the settlement, so we are likely to do that, but we need to think about the human cost too. Down the line, what will these things mean for individuals, families and our communities? Oldham’s £200 million of cuts leaves a gross budget of £188 million. More than half the town’s money has been taken away by the Government.

If the answer to providing adult social care is a 2% levy on council tax, let us follow that through to see what it means. For Oldham Council, a 2% increase in council tax, as directed by Government, would generate £1.5 million, because of course the town has a low council tax base to begin with. However, the increase—just—in the living wage impacts on social care contracts, and so, not even taking into account an older population or increased demand, there is a £2.7 million increase in wage bills. With £1.5 million generated in council tax and £2.7 million in increased wage bills through the Government’s living wage, the numbers do not add up. This does not even allow us to stand still; we are going backwards.

I am sure that the hon. Member for St Austell and Newquay (Steve Double) is very pleased with a cash bonanza to buy his vote today, but some of us were not so fortunate. We had a raw settlement and a raw deal from this Government, because on top of the £200 million in cuts, we cannot ignore the rural relief grant. So it is cash after cash after cash for rural areas, not taking into account a single bit of need. It has already been pointed out that 85% of this funding is being given to Tory shires, but let me go closer to home and look at Greater Manchester.

Trafford has some rural areas, but let us look at them: Bowdon, Alderley Edge and Hale—“Footballers’ Wives” territory. This is the most affluent borough in Greater Manchester. It has the highest council tax, the highest business rate base, and the healthiest budget as a result of this Government’s policies—but that is not all. Because of the way that you have protected your side, you have something in common with Trafford—Baroness Williams of Trafford, the Local Government Minister and former Trafford Council leader, who lives in Trafford. Is a “friends and family” discount being offered? What do we need to do, Greg? Do you want to come and live in Oldham? If that helps our financial situation, then we will—

Order. I know that the hon. Gentleman is new, but he speaks through the Chair, so when he is saying “you” he is addressing me. Members are referred to as hon. Members or named by their constituency.

I am very sorry for that slip, Madam Deputy Speaker.

The truth is that the five most deprived areas get absolutely zero—nothing—from this Government. At the same time, the five least deprived areas, together, share £5.3 million between them.

I appreciate that the hon. Gentleman is new to this House, but first he should know that of course Trafford does not get any rural grant because it is not a rural authority. Secondly, he might want to reflect on the remarks that he made about my noble Friend Baroness Williams of Trafford, who is, and has been throughout her career, an excellent public servant. She has done great work, not only in Trafford, for Greater Manchester, and is a woman of the utmost integrity. I think he will want to reflect on that.

I am quite happy with my comment. There is a direct link between Government Members who had to be bought for their vote today and the fact that the only council in Greater Manchester to receive the transitional grant happens to be the place where the Local Government Minister lives. I am sorry about that, but I did not choose where the Baroness chose to be a council leader and chooses to live.

The crux of the issue is that the Government steered through the cuts in a very politically tactical way but have not at all understood their true impact, which has been found in review after review, and by the Public Accounts Committee in this House. If the responsibility of Government is to look after the welfare of their citizens, then on that test I am afraid they have failed.

It is a pleasure to take part in this debate. I stood here a month ago and said that now was the time for the rural voice to be heard. A month on, I am pleased to say that the rural voice has spoken and has been heeded, at least to some extent. I pay tribute to the way in which my right hon. Friend the Secretary of State has conducted the consultation, making time for colleagues in all parts of the House and councils from all parts of the country. He has turned a consultation exercise, which can sometimes seem like a rubber-stamping exercise, into a genuine engagement with people across the country.

I believe that my hon. Friend and I are on the same side on this matter. Does he agree that the test of a good Minister is that they are prepared to change when they are faced with a valid argument for doing so? That is what the Secretary of State has done following the representations that my hon. Friend, I and others have made. The deal may not be perfect, but does my hon. Friend agree that it is better than it was?

I expect that my right hon. Friend and I will always be on the same side on such matters. He is right in what he says.

One of the most important aspects of the settlement—the promise to look again fully at the needs of local government—is not actually in the settlement, and it is long overdue. As my right hon. Friend has just said, when the facts change, sometimes my opinions do, too. The fact is that this country has a fast-ageing population, as Labour Members have said, and the distribution figures show that older people are disproportionately to be found in rural, rather than urban, areas—[Interruption.] Some people are saying “Nonsense!” and “Rubbish!” I do not know what dataset they have, but just as there is a massive discrepancy between the amounts per head for rural and urban areas—it was 50% when Labour left power, and it is 45% now—

Nobody from the Opposition is denying that elderly people live in rural areas, but does the hon. Gentleman agree that we have to consider those people’s ability to pay? The most deprived areas have the greatest need for publicly funded care. Does he not agree that that must be part of the equation?

Some of the hon. Lady’s colleagues deny that the people in rural areas are older, on average, than those in urban areas. They shouted “Rubbish!” just moments ago when I asserted that, even though the shadow Minister acknowledged it in his speech in January. People are, on average, older in rural areas, and the hon. Lady is clearly unaware of—or, like too many of her colleagues, closes her ears to—the fact that people in rural areas are, on average, poorer than those in urban areas. Average earnings based on residence are lower in rural areas than in urban areas. Average earnings based on place of employment are lower in rural areas than in urban areas. That is not to say that centres of real deprivation do not need special and specific support, but to generalise that the poor burghers of Sheffield are all on the breadline, whereas everyone in Withernsea in my constituency is living it up in some rich, prosperous rural idyll, is nonsense. I know that the hon. Member for Leicester West (Liz Kendall) would not do that, but too much of the Labour party’s argument has suggested otherwise, as has much of today’s debate.

If we are to move to a fair system, we must recognise how iniquitous it was of the Labour Government to use density to drive funding to wealthier, younger, less needy urban areas. The Labour party is now screaming about an adjustment that recognises an ageing population, predominantly based in rural areas, who are also poorer. Those are the facts; if they are not, I will happily take another intervention from the hon. Ladies who shouted “Rubbish!” at me. The Labour party was shameful in skewing the funding formulae. It is equally shameless now in pretending that my right hon. Friend the Secretary of State is being unfair in dealing with the mess that the previous Labour Government left behind and making the tough decisions that he has to make.

In a less partisan spirit, I say to Members from all parts of the House that we must work together on the needs assessment to embed efficiency, not dependency and incompetence, and to recognise hard need such as an ageing population. Someone who is relatively healthy but old has—guess what?—higher health needs and higher social care needs. They are entwined, as colleagues from all parts of the House have said. They are predominantly less well funded in rural areas than in urban areas, so there is greater need. The Labour party should hang its head in shame at the fact that it turned its face utterly against that clear and present need. If the party apologised, as it should, for doing so, it would have much more traction in the debate to appeal for a fair and proper settlement.

My hon. Friend is making a very good point. Does he agree that the review needs to take place sooner rather than later—there must not be any delay—and that it must cover all needs, including the demographics, which is very important in rural areas?

I pay tribute to my hon. Friend, who has been a champion of the rural interest, along with so many other colleagues, in arguing for a fair settlement. In the rural fair share campaign, which has always been a cross-party campaign, we have been clear that we want something that is fair to all.

The reason I have been so confrontational with Labour colleagues is that I am starting to hear the old untruths coming out, such as the suggestion that there is a difference, as the hon. Member for Oldham West and Royton (Jim McMahon) described it, between some phenomenally wealthy Trafford and some downtrodden Oldham, and that the allocation of money is utterly unfair. Of course the people taking the biggest percentage reductions in the Government grant were predominantly, in the original settlement, rural areas. Mets were getting an average reduction of 19% and rural areas were seeing cuts of 30%-plus in their Government-supported spending. That is the truth: those are the facts in the data table. Yet, to listen to the hon. Gentleman, one would think the opposite was true. He puts forward the entirely false argument that the cuts are somehow unfair. Transitional arrangements are put in place to soften the blow.

We now have the opportunity—I must say that I congratulate my right hon. Friend the Secretary of State—for all of us, on both sides of the House, to move to a settlement that is fair to rural and urban areas alike and to Labour and Conservative areas alike. Never ever again must we have a Government who, for partisan purposes, put in place a skewed and unfair formula in the outrageous, shameless and shameful way that the Labour Government did during their 13 years.

I was hoping I was not going to be the next speaker because I am speechless after that peroration by the hon. Member for Beverley and Holderness (Graham Stuart). It is extraordinary what this Government have managed to do in pitting town against village, the north against the south, and the metropolitan areas against the shires. It is disgraceful. They have created division by the decision they made on the original settlements and then by finding this magic, back-of-sofa money. I have never known anything so deliberately partisan. I did not believe I would ever see anything like it.

I admire the hon. Member for St Austell and Newquay (Steve Double), who is no longer in his place, for at least having the honesty to come to the Chamber and tell colleagues he was thinking of voting against the Government today, but that he had changed his mind. He changed his mind—he was very open about why—because his council will get some extra money. He therefore felt that he could vote with the Government. Well, give me some extra money and I might think about doing so!

I do not resent Conservative Members for being good champions of their areas and winning some extra funding for their councils—that is one of the things we are in Parliament to do—but I hope that they enjoy the extra money they get and that they win the shire council seats for which it was clearly designed to ensure victory. I hope that they enjoy that, but that they realise it will happen on the back of services in my area and those of my hon. Friends the Members for Oldham West and Royton (Jim McMahon) and for City of Durham (Dr Blackman-Woods). These are the services for deprived children, the children centres that are closing in my constituency, and the libraries that are closing—

My constituency has two libraries, both of which are to close. The market at the heart of my town is set to close. I hope Conservative Members enjoy the extra funding that they will receive, because my town and the people in my town are angry. I have never seen them this angry before. They are angry about what is going to happen, but also about the unfairness.

I will not give way. Why should I give way? Why should I give way to the Secretary of State who is ripping the heart out of my constituency? Why should I give way to him? He had half an hour at the Dispatch Box; he made a statement on Monday; he had Communities and Local Government questions on Monday. He has dismissed all attempts by Labour Members to lobby him. He has provided nothing for my constituency. My constituency is a town the same size as Wokingham. My constituency gets nothing from transitional funding—not a penny. In fact, we will lose £2,000 a year. Wokingham is getting £2.1 million of additional funding. The two towns are the same size and have completely different needs. My town is losing out.

I am not going to give way. I am going to allow other Members to make the case for their constituencies. I hope the Secretary of State listens to what we are saying and takes it on board. I know that he is familiar with my part of the country. He needs to think about the needs up there, because the people of the north-east will never, ever forgive this Government for what they are doing to our region.

The need to reduce the deficit has inevitably put pressure on councils right across the country. Even those that have made substantial and successful savings are understandably concerned about the transitional period during the move from centralised funding to an accountable system of self-funding.

At the start of this year, the leader of Essex County Council wrote to me and my fellow Essex MPs, setting out his concerns regarding the provisional local government finance settlement, which he thought would see the council lose over £50 million a year more than it was anticipating, despite having budgeted carefully. We took our case to the Secretary of State and I welcome the fact that he listened. As we know, he has made available up to £3.5 billion for social care.

Essex, like many council areas, has a serious and pressing challenge in its ageing population. It has the longest coastline in Britain and attractive coastal towns, so it is an attractive place to retire to. Over the next decade, our older population is expected to grow by 9%. As has been said, it should not be assumed that just because someone lives in beautiful rural Essex, they are not stretched for cash. People who live on a park homes site on a fixed income may not be the richest members of society. The demographic pressures are huge and we welcome enormously the fact that the Government have listened to our case.

Essex County Council is very much looking forward to the challenge of being more go-getting when it is dependent on the retention of business rates. We recently hired a new chief executive who is an ex-businessman, and he is taking an incredibly positive approach. We believe that the devolution agenda will transform local government from being about service delivery and dealing with needs to being organisations that set out to change their areas, encourage business development, and create jobs and growth. It is businesses that create jobs, wealth and growth, not politicians like us and local councillors.

Councils such as Essex County Council, which have shown that they can make efficiency savings, will benefit from the security of this four-year settlement. During this difficult time for all public finances, councils need to be able to plan for the medium term. Owing to the foresight of this four-year settlement, they can do so. This settlement brings greater transparency and parity in local government finances than we have ever had before.

The retention of the new homes bonus, which the Secretary of State mentioned, is incredibly valuable. Councils will have to be active in bringing forward new development and new houses, rather than sitting back passively, as they used to in the days of top-down national targets, when large green-belt sites were allocated to big unit developers, which may or may not have built on them because it was not in their business model to get on and build houses and so reduce house prices. Councils know that they can now invest officer resources not just in bringing forward new businesses and making life easier for businesses in their area, but in bringing through new developments, perhaps on smaller sites with local businesses, that will be sold to local people through local estate agents.

The entire package is an enormous step forward in local government finance. It will be very healthy for democracy and business creation around the country.

I want to make just three points to the Secretary of State. Let me start by saying that, as he knows, he has enjoyed a good reputation among many Labour Members. I am afraid that that reputation has taken a bit of a battering from the settlement he presented this afternoon. It is with some sorrow that I say that.

I simply cannot square with any sense of fairness an outcome that means that budgets in Buckinghamshire will rise by 11.5% by 2016-17, while budgets in Birmingham will fall by 10% over the same period. Quite frankly, the battering of Birmingham has gone on for far too long. We had looked to this settlement for some sense of salvation.

I will be grateful for small mercies, and I am grateful that the Secretary of State recognises Birmingham’s case that there is a fairer funding formula to be had. The challenge is that the Secretary of State does not plan to introduce that new settlement until 2016-17. There is nothing to accommodate the shortfalls in 2014-15 or 2015-16. Yet if we were on the funding formula that the Secretary of State acknowledges would be good, an extra £98 million would be flowing into our city right now.

The Secretary of State has said that that is not realistic because there is a fixed budget: what comes from one authority is what goes to another. We listened to those arguments, yet in the past couple of days, lo and behold, from down the back of the sofa in the Secretary of State’s office comes £150 million of transitional funding, plus £90 million in rural delivery grant, none of which is available for the city of Birmingham. There is no attempt to address the unfairness of past settlements or to tackle our weaker ability to raise a social care precept, no confirmation of flexibility about capital receipts, no clarity on our four-year settlement, and no way of bringing forward any funding in the better care programme for social care. The reduction in our spending power is twice the national average, despite the extra needs in our city.

In the weeks to come, I hope that the Secretary of State will reflect on not only the knock-on effects on local government, but the danger of knocking over the health service in east Birmingham. As he knows, my constituency is home to Heartlands hospital, which has been put into special measures, has a £54 million deficit and has now been taken over by Queen Elizabeth hospital. There is unprecedented pressure at the front door and A&E, which is exacerbated because the crisis in the social care system means that it is so much harder to get older residents out and into their homes. The delayed discharge rate at Heartlands hospital has increased over the past year by four times the national average. According to the House of Commons Library, public funding shortages are driving that whopping increase. Delays due to public funding shortages have increased by 1,000% in the past year.

I put it as gently as I can to the Secretary of State: we have a funding crisis in social care that threatens to knock over our national health service. I know that he will say that funding solutions for social care are coming down the track, but the crisis in our health and social care services is not in the years to come, but now. On top of that, Birmingham City Council anticipates that it will have to take another £92 million from social care in the next couple of years. That is not credible or realistic, but intensely dangerous. Birmingham demands new solutions from the Secretary of State, and not for the years to come. Birmingham needs them now.

It is a pleasure to follow the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), who has great experience of working in the Treasury. I gently say to him that I would be more than happy to offer him a deal—not that I have the power to do so at the moment—of swapping per capita funding for his constituents in Birmingham with that for constituents in Nottinghamshire, East Yorkshire, Cornwall, or any such rural area. Today, per capita funding—[Interruption.] If the right hon. Gentleman wants to intervene, he can do so, but shouting from a sedentary position is not the thing to do.

Let me offer the hon. Gentleman a deal: will he join me in arguing for a special and strong weighting for poverty in the needs-based formula that the Secretary of State plans to review?

I am more than happy to argue with the right hon. Gentleman, and stand side by side with him if we are talking about older people and those who are less wealthy, who tend to be found in rural areas. That is the challenge that we face today. In those rural areas, the population is not only older, but less wealthy and people have further to travel to the resources and services that they desperately need. For someone who lives in a rural area, needs a hospital appointment and has to use public transport, the public transport links are not as good as they are in urban areas. The doctor is further away than a doctor in an urban area. There are much greater challenges for those who live in rural areas.

My hon. Friend should also remember that pupils in Birmingham get funded £1,000 a year more than my pupils in Leicestershire, yet one of the most deprived towns in the county is in my constituency.

I thank my hon. Friend for that intervention. Thank goodness that at last the Government are starting to address the challenges faced by rural areas. The Secretary of State has given us a four-year settlement, which means that local authorities will not be living hand to mouth but can plan for the next four years. They know what they have got coming, which means that they can plan to use some of the resources and reserves that some of them are sitting on, to ensure that they protect our constituents and look after their needs. They will not have to sit on those reserves thinking that they may need them within the next 12 months.

That builds in a buffer so that authorities that are keen to promote business and housing developments, and to ensure that the local economy expands, have time to increase the amount of revenue that they generate. That is a positive step forward, and I am working alongside Nottinghamshire County Council and the local enterprise partnership to try to create jobs in my part of Nottinghamshire, so that in future we can live by our own means, and generate and boost the local economy. Authorities that give a boost to their high streets and protect local shops will reap the benefits of that when those successful businesses are able to pay rates back to the authority and contribute to the local economy by creating jobs.

It is sometimes enormously frustrating in Nottinghamshire when I hear councils complain that they are short of cash and will have to shut services, when at the same time one of my district councils is working with the county council to spend £1.4 million on swapping people’s dustbins. My constituents do not understand why we need to spend £1.4 million on that, at a time when the council says it is short of cash to deliver the services my constituents desperately want. Hopefully, with the help of the Secretary of State we can get to a more balanced settlement, have a vision for the future, and mitigate that change with the support that he is providing.

Let me begin by providing clarification to the Secretary of State about comments on fairness from Durham County Council—this is via the wonders of modern technology—that related to certain aspects of the provisional settlement and not to the total or final settlement. The council said that the settlement would put the county at a huge disadvantage, and that none of the extra cash has been targeted at areas with the greatest need. It added that the settlement was “unfair” and “far too late”, and I hope that the Secretary of State will accept that clarification.

It is clear that that is a response to the statutory consultation, and to reassure the hon. Lady that I am not taking anything out of context, the section that I quoted from is entitled, in bold, “Fairness of Settlement” and states:

“In our view, no authority can now claim that this approach is ‘unfair’.”

It is as clear as day.

I think that is the fourth time we have heard that from the Secretary of State this afternoon, but that does not make it right. Durham County Council has clarified that, and it thinks that the settlement is totally unfair.

Simon Henig, the leader of Durham County Council, has just sent me a message to say that that aspect was part of the original consultation, and that it does not consider the latest round, which includes the transition fund, to be fair.

I am grateful to my hon. Friend for confirming what I have just said. Those of us in Durham think that the settlement is absolutely shocking because, once again, it hits hardest those councils with the greatest problems and highest levels of disadvantage, such as Durham. I had hoped that the Secretary of State’s comments on Monday would go some way to addressing the balance in favour of areas with the highest need, but I am afraid there was not a glimmer of that. Given the Government’s record of unfairness and widening inequalities, it is perhaps not surprising that the settlement massively favours Conservative councils. In fact, 87% of the funding announced on Monday is going to Tory councils.

I am not going to give way to the hon. Gentleman, because he would not take an intervention from me.

The only north-east council to benefit from the £150 million additional funding announced on Monday is Northumberland. That is staggering, especially as Durham is also a substantially rural area. It is odd, then, that Northumberland is the only council to benefit from the rural fund. Indeed, if we look across the country, the areas to benefit most are Surrey, with £11.9 million; Hampshire, with £9.4 million; North Yorkshire, with £9.2 million; and Devon, with £8.3 million. Examples of the reduction in core spending tell a similar story: Durham had a reduction of minus 4.1%; Newcastle minus 4.4%; and Sunderland minus 4.3%. Compare that with Surrey, which has a decrease of only minus 1.1% and North Yorkshire minus 0.3%.

I will not give way to the hon. Gentleman, just because we are very short of time.

It is very clear from those figures that shire county areas and southern authorities have received below-average reductions in core spending power, while deprived areas have received above-average decreases, continuing the unfair trend set by the coalition Government. As we have heard from other Labour Members, the very councils suffering the highest cuts have a higher demand for children’s services, evidenced by severe cuts to our children’s centres, with most closed under this Government, and greater demand for adult social care and higher levels of need for good public health. That is not, however, reflected in core spending power per dwelling. The average across the country is £1,838, but for Durham, an area of high disadvantage, it is only £1,608. By comparison, the whole of Surrey gets more than £2,000 per dwelling, while Richmond upon Thames receives £1,866. Based on current forecasts, Durham’s total savings target for the next four years is £105 million, so there will have been £260 million of cuts since austerity began—figures so large that they are difficult to comprehend.

Figures are important to understanding the gross unfairness in Government funding, but we need to take a moment to consider what this means for people who need council services. Even by dipping into council reserves, Durham faces severe challenges with regard to social care charges, the provision of essential youth services and support for vital bus services. I say to the hon. Member for Beverley and Holderness (Graham Stuart) that Durham is a rural area, too. It needs to support its bus services, but the Government are not allowing for that in the current formula, not to mention any access to leisure facilities.

The council will do its best to ensure that the most vulnerable people are protected and that, where it can, capital will be used to promote economic growth and tourism, but the Government should take no comfort from that. The statement on Monday was a disgrace in that it failed to address the needs of some of the most disadvantaged people in the country. The settlement leads to the extraordinary position whereby residents in more affluent areas are receiving services of higher standards and greater volume than in areas where a lot of the people are low waged or where historically they have high levels of poor health. That cannot be fair and no amount of loquaciousness and tongue twisting from Government Members will make it so. It is time for a fair local government finance settlement based on need, not the political colour of the local authority.

I will start in the way I concluded the debate on this issue in the House on Monday, by saying, “Thank you” to my right hon. Friend the Secretary of State for listening carefully to the representations made to him and for making significant improvements from the draft settlement. As there has been quite a bit of to-ing and fro-ing here about what local authorities might think, let me add to that list. I have in my hand a piece of paper.

North Devon District Council was dissatisfied with the draft settlement, as I made clear in the House after its introduction. I spoke to the council at great length. It was not happy about being unfairly treated. It believed, as did many, that the settlement did not tackle the unfairness between rural and urban authorities, and it asked me to do something about it.

After much intense lobbying, the Secretary of State has come forward with a new and improved final settlement, and this afternoon, at about half-past 2, the council issued a media release—not from the Conservative group, but from the neutral officers of the council. The headline reads, “Council welcomes Rural Services Delivery Grant increase”, and it continues:

“North Devon Council has welcomed news that a government grant is to be increased, which will help benefit rural areas like North Devon… It means, instead of £77,000 identified in the draft settlement for North Devon…the district is now likely to receive £308,000. Meanwhile, for 2017/18, the council is now likely to see its Rural Services Delivery Grant come in at £249,000, instead of the previously predicted £134,000… Executive Member responsible…says: ‘This is really good news for North Devon and other rural districts.”

That goes to the heart of the problem that I and many other Members had with the draft settlement: it was unfair. There followed, however, a great deal of lobbying from us and a great deal of listening from my right hon. Friend the Secretary of State. It is disappointing, therefore, to hear the Opposition describe this as a fix to head off a rebellion—talk about glass half empty. My right hon. Friend listened to colleagues, responded positively and significantly improved the final settlement. We should all welcome that.

The funding of adult social care is a serious issue. In north Devon, and Devon as a whole, with its older demographic, of course it presents a challenge, but, again, the Government and the Secretary of State have sought, in the final settlement, to do something positive. During Labour’s 13 years in government, when it could clearly see this challenge looming—the demographics were there for all to see—it did absolutely nothing to address the problem. It left it to this Government to do something about it, and as always happens, the electorate recognised that only a Conservative Government would do that.

We have heard a lot about party politics. Given that the extra money for Devon covers Exeter, has Labour objected to additional money for social care in Exeter?

My hon. Friend makes a good point. The right hon. Member for Exeter (Mr Bradshaw) does not seem to be in his place. Neither are any Liberal Democrats here for this important debate, despite their trying to sell themselves as the party of local government that wants to build from the ground up. There are not many of them, but not one of them has come to speak in this important debate.

I thank my right hon. Friend again for listening and making this significant improvement, but we need to go further to address the long-term unfairness between rural and urban settlement grants. My hon. Friend the Member for Beverley and Holderness (Graham Stuart) said that £130 million was needed for the rural grant. I hope the Government can look at that aspiration, but in the short term, I welcome the settlement, as do Devon County Council and North Devon District Council. It shows what can be achieved when Conservative MPs and local authorities and a Conservative Government work together, listen and get a settlement that I hope we can all support in the Lobbies this evening.

I well remember the Prime Minister in 2010 speaking to the country and declaring that we were all in this together. That had a ring of fairness that resonated with the British people. He went on to say that those with the broadest shoulders would bear the greatest burden. Sadly, those were just words and were never backed up with action. My constituency is one of the least affluent areas of the country, and despite that, since 2010, Burnley Council has seen its funding cut by a staggering 54%. Cuts of that magnitude have also been the order of the day at Lancashire County Council. As if all that is not bad enough, during the same period other, more prosperous authorities have had their funding increased, which demonstrates an outrageous absence of fairness. The people of Burnley have known since 2010 that we are certainly not all in this together.

As the former leader of Burnley Borough Council, I am no stranger to belt-tightening exercises, and I can tell the House that it was exceptionally difficult at times. The Minister for Housing and Planning may well remember meeting me on more than one occasion when I pleaded with him to grant transition funding for Burnley. He will, no doubt, also remember the long and tedious process involved for Burnley and other authorities to secure that most essential funding. Having negotiated numerous hurdles, Burnley Borough Council demonstrated efficient transitional activity. It was, and is, an efficient council.

When this year’s provisional settlements were announced, councils across the country were, unsurprisingly, angry about the cuts to their budget, but it seemed like the Secretary of State was listening when he announced an additional £300 million over the next two years. We welcomed that, until we saw where the funding is going to go. Will it be distributed to those areas most in need? Of course not. Given this Government’s record, we ought not to be surprised that more than 80% of that additional funding will go to the most prosperous authorities.

Since 2010, the five least deprived authorities have, overall, had their budget cut by £7 per person, while, shockingly, the five most deprived authorities have had their budgets cut by more than £336 per head. Will the Minister explain what funding formula he has used to arrive at this latest settlement? I note that Burnley is to endure a further budget spending cut of 4.8%, while the more affluent areas of South Ribble and Uttlesford are to enjoy budget increases. So, while Burnley will have its budget cut by 4.8%, Uttlesford will have its budget increased by 6.4%. I have no problem with the people of Uttlesford, but I do with the lack of fairness.

Did those councils have to go through a lengthy process of targets and assessments to access that increase? Of course not. A word in the Prime Minister’s ear, it seems, and the budgets are increased. What message does that send to the people in Burnley? Has the Minister stopped for one minute to think what the impact of the cuts will be in Burnley? Does he even care?

The cuts will result in reduced social care services for the elderly and disabled; the closure of community centres and libraries; the loss of bus services; the loss of support for those fleeing domestic violence; and the withdrawal of services for those struggling to cope with autism. I could go on, but it is clear that the most vulnerable will carry the heaviest burden, while those with the broadest shoulders are given a bonus.

Burnley has been cheated, and I believe that these further unfair cuts will confirm to the people of Burnley and Padiham that this Conservative Government will always prioritise the needs of the richest at the expense of the poorest and most vulnerable. If the Minister were to change his mind and reconsider—

It is interesting to follow the hon. Member for Burnley (Julie Cooper). Perhaps this debate has given us a chance to look forward to the future, given that the Lib Dems have left the building, but it has also given us an opportunity to look back to the past. Just over a year ago, Labour had been complaining for nearly five years about various local government settlements. An election was coming and Labour Members were challenged: “What extra would you do?” Their answer was, “Nothing.” It is interesting to compare their rhetoric today with the reality.

A four-year local government funding settlement is welcome. I used to work in local government and it made no sense to find out in December what we would have to spend from April and to then base it on a budget that was set at the back end of February. Whatever anyone’s view of the overall settlement, it makes eminent sense for councils to be able to plan in a similar way to Governments.

I represent one of the few totally urban constituencies to the west of Bristol, but do I object to the recognition given to the challenges that our neighbouring county faces in delivering services? For all the fury and rhetoric we have heard about Conservative areas being favoured, it is worth noting that Exeter, the one Labour constituency west of Bristol, falls under Devon County Council, which is going to benefit. [Interruption.] Judging from what we have just heard, it seems as if Labour is working to ensure that it has no MPs west of Bristol after the next general election.

Issues affecting coastal communities are well worth looking at. In my area, we are a mixture—in some ways urban and in some ways rural—but we certainly have big social challenges and problems surrounding an ageing population. In one ward in my constituency, 9% of the population is aged over 85, and it will soon be 10%. Whatever anyone says, that makes for a real challenge.

When it comes specifically to Torbay, some lessons can be learned by other councils from its approach to the challenges presented by asking the LGA to come and work on a peer review. This confirmed the council’s viability and suggested that it needed to develop its own vision for the future. I could suggest some areas on which it might want to review its spending—subsidising the local conference centre, for example—but at the end of the day, a positive picture has been presented of how a council that wants to grapple with the issues and wants to put forward a vision can build towards the future, while facing some of the biggest demographic challenges with childcare at one end and elderly social care at the other.

I welcome aspects of the settlement. I think it is fair settlement overall—one that does not denude my area when it comes to assisting other areas. With greater devolution and more areas working together—and particularly with Devon, Somerset, Plymouth and Torbay looking to work together—it is wrong to present this false idea of little islands all working on their own that we have heard from Labour Members. That is absolute nonsense.

There are positive aspects, but yes, there are still challenges. We have heard some false anger from Opposition Members, when Labour did not pledge any extra funding in this area and argued during the election campaign that it did not even want to match our pledges on the NHS.

There is nothing false about the issues we are raising this afternoon. We are simply asking for a fairer settlement for local government that takes account of levels of disadvantage and levels of need, and for the needs of rural areas such as Durham, as well as rural areas elsewhere, to be acknowledged.

There may be nothing false about the issues, but it is somewhat false to come into this Chamber and complain about reductions in local government funding, when Labour Members had an opportunity to change the situation in their manifesto but failed to do so.

My hon. Friend may want to reflect on the fact that the reductions in Government grant and Government spending power over this Parliament to the original settlement in Durham amounted to 19.6%, yet rural areas were seeing reductions of 30%-plus. That is why Durham did not receive transitional relief—because it was not among the councils that were suffering the most. It is a simple concept, but Labour Members have misrepresented it—and yet again they should be ashamed of themselves.

I thank my hon. Friend for bringing his usual laser-like precision to the debate. It is interesting to reflect on some things, and I expect some council leaders will be reflecting on the old floors and ceilings that used to exist in local government funding as a means of altering the assessments.

I therefore find some of the fury we have heard this afternoon to be somewhat unconvincing and fairly fake, given the absence of proposals for any extra funding. When the Government are being attacked and the Secretary of State offers to intervene, the refusal to accept it just about says it all.

I am pleased about aspects such as the coastal community fund and some of the other funding and support that is coming in. I am most pleased to see a Government who are prepared to let councils get on with their work and reward those that deliver economic regeneration, as well as a Government who are delivering an economy that will provide benefits to local people. Ultimately, this is a Government with the vision to take the country forward rather than a vision for attacks and a lot of hot air. When it comes down to it, the Chancellor put up a manifesto, put up a commitment and said where it was going to be paid from—yet nothing came forward from Labour.

Let me tell the hon. Member for Torbay (Kevin Foster) that this is an issue about distribution and the unfairness of the distribution of these cuts. Some parts of the country that have the greatest social and economic need, such as Liverpool, are facing the biggest cuts yet again. That is what Labour Members are genuinely very angry about, reflecting the anger in the communities we represent.

My hon. Friend the Member for Liverpool, Riverside (Mrs Ellman) has already spoken about the challenges that we face in Liverpool. I join her in paying tribute to the mayor of Liverpool, Joe Anderson, who has done a fantastic job in leading Liverpool over the last six years. Where did he start? He started with efficiencies. Efficiencies could be made, and he made them. Then he turned to innovation. He made a city deal with the Government that enabled him to rebuild or refurbish 12 schools that had lost out when the Government cancelled Building Schools for the Future. He took the lead, working with other council leaders in Merseyside, in securing city region devolution.

It is not a question of a choice between efficiency and innovation on the one hand and cuts on the other. Liverpool is facing up to the challenges, but even with efficiencies and innovation, its funding from central Government has been cut by 58%. That is simply not tenable. It is simply not possible to balance the books without harming front-line services.

That brings me to the £300 million of Government transitional support. Conservative Members have made legitimate points about rural payments. Rural poverty is undoubtedly a real issue, as is an ageing population, but if that is what the transitional money is about, why on earth is Surrey the biggest beneficiary of the additional money? It is not going to the poorest rural areas. Despite that 58% cut in central Government funding, Liverpool will not receive a penny, while Surrey will receive a substantial amount.

Let us have a fair system of funding. I do not want to talk about “urban versus rural”, because this should be about need and deprivation. Yes, there is deprivation in rural areas, but there is also considerable deprivation in constituencies like mine. I want to ensure that there is fairness and justice in the treatment of different types of authority, but hitting a council like Liverpool with a 58% cut and then providing no transitional support does not strike me as reasonable.

According to the figures that I have seen, the average cuts in Government-funded spending power in this Parliament will be 19% in metropolitan areas and 30% in rural areas, and the figure for Liverpool is just over 15%. Where did the hon. Gentleman find his figure of 58%?

I am talking about the actual reductions in Liverpool’s actual funding from central Government. However, the hon. Gentleman has helped me by bringing me to my next point, which other Members have already made today.

In areas with greater social and economic needs and higher levels of poverty, such as my constituency, the council tax base is such that allowing local authorities to increase council tax simply does not have the impact that it has in Surrey and some of the wealthier London boroughs. My hon. Friend the Member for Liverpool, Riverside spoke about social care. The increase in council tax that Liverpool has been allowed will enable us to raise £2.7 million. That is better than nothing, but the city’s social care budget has been reduced by £90 million since 2010. We can raise £2.7 million, but the gap is still £90 million.

My hon. Friend the Member for Leicester West (Liz Kendall) made the important point that, while we must take account of demographics and the number of older people in each area, we must also take account of ability to pay. One Member mentioned the number of people aged over 85 in one of his constituency wards. Clearly that brings pressures, but life expectancy in poorer parts of the country is such that not many people live until they are 85. Those are the kind of pressures caused by an ageing population that are faced in areas of high poverty, and they are different from those that are faced in other parts of the country.

I urge the Minister and the Secretary of State to think again, and, in particular, to take up the excellent suggestion made by my hon. Friend the Member for Leicester West and make the better care fund money available immediately. That could at least help us with what is an emerging social care crisis. As a number of my hon. Friends have said, it is a human crisis not just in terms of the provision of social care, but in terms of the additional pressure that is placed on our health service.

I am hopeful that devolution for the Liverpool city region will bring many benefits, but those benefits are more than cancelled out by the scale of the cuts, which are simply unfair because they hit the poorest parts of the country—constituencies like mine—much harder than the rest.

I warmly welcome this statement today from the Secretary of State. My local authority, North Yorkshire County Council, will receive £15 million in transitional funding over the next two years, and my district authorities will receive £1.4 million. We hear cries of “Tory plot” from the Opposition, but my local authority was facing a 37% reduction in its funding, compared with an average of 20% for metropolitan authorities. What kind of Tory plot is that? This is about fairness.

Does my hon. Friend also welcome the news that Labour-run Carlisle and Labour-run Cumbria are also receiving some transitional relief?

I do welcome that news.

This funding is targeted at the locations with the biggest falls. Opposition Members need to understand the profound feeling of unfairness that exists in my community, not just about funding for rural services but about the way in which our schools and healthcare are funded. How would they explain to an elderly constituent of mine in need of adult social care why she should get less funding than somebody in an urban area when she pays more in council tax? Why is that right? The right hon. Member for Birmingham, Hodge Hill (Liam Byrne) mentioned disadvantage, but a band D council taxpayer in my area pays £1,472 a year, which is £200 more than someone in his constituency.

These are deep cuts for the people we need to protect in our communities, whether they affect our libraries, our bus services, our post offices or those in our voluntary sector who do such fine work but who rely on central moneys to pay for the car schemes, the home visits, the day care and the relief care. I therefore welcome the fair funding review that the Secretary of State has announced. We just want fairness. We do not want a better deal than urban areas; we just want a fair deal, and whatever deal is arrived at needs to be baked into the system.

Historically, underfunding by successive Governments has led to our paying more in council tax and to our homes being more expensive to buy or to rent and more expensive to heat. Among the elderly population in my constituency, the numbers are rising three times faster than those in metropolitan areas, and the cost of providing services to those people is much more expensive. The Government recognised that in 2013-14, but we only got 25% of the funding that we were due, owing to damping.

What we need is a simple, transparent system that recognises need. Whatever that system might be, if it is fair Conservative Members will sign up to it without question. None of us is complaining about the size of the cake; we just want a fair distribution. We realise that we need to make cuts. Every time we have one of these debates, Opposition Members refuse to say where they would make such cuts. They are deficit deniers. We need to make cuts in our area. Our local authorities need to become more efficient.

In my area, we have eight separate local authorities. That cannot be right at a time when we are having to make deep cuts, and we need to look for efficiencies. That cannot be an efficient way to run local government. Local authorities have a part to play in this, and we have a chance to reorganise as part of the devolution revolution. We have a complex system with five clinical commissioning groups, five health trusts, eight local authorities and a huge number of voluntary organisations. If we are to make the best of the money available and balance the books, local government will of course have to play its part if we are to become more efficient. We need to bring together all our services, such as health, social care, housing and education, to ensure that they are interconnected and that they work more effectively without duplication, complexity or bureaucracy. This settlement gives us the breathing space to develop a new fairer funding formula—a simple, fair, future-proof and rural-proof formula—and I am very happy to support the motion.

It is pleasure to contribute to this debate. First, I wish to pay tribute to all local councillors, of all political parties and none, for the work that they do in the world of local government, making sure that local services are provided to the people we represent in Parliament. They do an incredible job in difficult circumstances. I say that having been a councillor on Tameside Metropolitan Borough Council for 12 years. My wife has been a Tameside councillor for 16 years, and I know the very difficult decisions she and her colleagues are having to make at the moment.

My constituency is served by two borough councils. They are very different in their socioeconomic and demographic, and political make-ups, but both are having to deal with tough—although different—spending decisions. Stockport contains the two Reddish wards in my constituency. Tameside would love to have Stockport’s settlement and its council tax base. Nevertheless, the cuts are biting hard in Stockport and I wish to make a few comments on behalf of the borough council. It says it is:

“Surprised at extent to which council tax growth is assumed in the government’s figures which…fail to acknowledge the spending pressures arising from government induced changes (e.g national living wage, NI increases and apprenticeship levy).”

It would be good if the Minister could respond to some of those points. Although Stockport Council welcomes

“certain aspects of the settlement, insofar as it is not as bad as it might have been”

it is

“under no illusions as to the scale of the financial challenges that face the Council”.

It says that it will have to

“take full advantage of the newly granted flexibility to increase council tax.”

I wish to make the point again that Tameside’s council has a £16 million social care deficit this year. It is now restricted to providing just critical and substantial care, which is statutory. That means the council still has to find the money to close that £16 million gap. Given that social care amounts to 60% of the council’s overall budget yet it serves only 4% of the residents of the borough, that money has to be found from the services everybody else takes for granted. I do not wish to repeat many of the points made by my hon. Friend the Member for Darlington (Jenny Chapman), but Tameside’s council is in a pretty similar position, in that its grounds maintenance, parks, road repairs and street cleaning are what is being literally—

Today, I have been downstairs to meet people from the Malnutrition Task Force, which is doing some brilliant work in Salford. We have more than 2,000 cases of malnutrition—we are talking about people over 65 here. This sort of thing is developing now. Cynical comments are made by Conservative Members about the real concern Labour Members have. We used not to need a malnutrition taskforce, and 193 out of 2,000 cases of malnourished older people were found in Salford. I know that Tameside has now launched a food bank to deal with this issue.

My hon. Friend is absolutely right about that. Of course these cuts to local government budgets must also be set alongside the £200 million in-year reduction to the public health budget, which of course local government controls—it is a point she makes very well.

In areas such as Darlington and Tameside, local residents are not going to receive the basic services they expect to receive because the social care gap has to be filled by the general fund. I am glad the Secretary of State is back in his place, because he keeps telling Tameside Members to speak to the leader of Trafford Council. I tell him that Tameside would love to have Trafford Council’s council tax base. Band D properties in Trafford bring in £84.9 million of income to Trafford, whereas the same band in Tameside brings in £74.3 million. That is because Trafford has many more band D properties, and it also has many more in bands E, F and G. That is the real unfairness.

In my closing few seconds, I will touch briefly on the better care fund, which is of course backloaded. We need that money today, because the crisis in social care is here, it is now and it is literally killing the council financially. I say to the Secretary of State that it is all very well giving money through the better care fund, but the council is losing a similar amount from the new homes bonus. We need a fairer settlement for the metropolitan areas, and a needs-based assessment, because Tameside and Stockport are being clobbered.

It is a pleasure to follow the hon. Member for Denton and Reddish (Andrew Gwynne). I concur with him and share his thanks to councillors and council officers, of all politics and none, for the work that they do, day in, day out, on behalf of their communities across the country.

To listen to Opposition Members, one would have thought that the settlements for their areas had been stripped away in order to adjust ours. Had that been the case, I would have shared their anger, but it is not the case. No draft settlement that was announced in December has been driven downwards. The Department and the Treasury, to whom thanks must be due, have found additional money. I find myself asking this question, because I am not convinced by the synthetic froth of anger that we are hearing from Opposition Members. Where were they—with the honourable exception of the shadow Minister and the hon. Member for Workington (Sue Hayman)—for the debate on the local government settlement just a few weeks ago? They were not here. They thought that they had got away scot-free, and that our areas were getting the clobbering. They have suddenly woken up and taken an interest in this situation.

My hon. Friend is right that it is a synthetic froth. Let us take Tameside and Trafford. In the original settlement, Trafford was facing a 28% reduction in Government-funded spending power, against 19% in Tameside. Surrey was facing a 54% cut—I would never normally speak up for Surrey—so it is no wonder that it got some transitional relief.

My hon. Friend is right. Frankly, the Opposition party has been rumbled on this. Let us not kid ourselves, this remains, even after the welcome announcement made by the Minister on Monday, a tough settlement. It leaves an unfair and unsustainable gap between funding for rural and urban areas. That continues. It has just been made a little less tough. There is no golden goose being given to Tory local government.

I hope that the hon. Gentleman will take back the point about synthetic rage. If other hon. Members had a hospital such as the one in my constituency, which is £54 million in deficit, and where delayed discharges are up 1,000% in a year because of public funding cuts, they would have a responsibility to stand up and say, “Think carefully about how you distribute money.” If they are representing a city such as Birmingham where there is another £92 million to come out of social care on top of the crisis that is already there, then, collectively as a country, we have a problem. I hope that the hon. Gentleman will take back his comment and recognise that there are genuine questions about the distribution mechanisms being put forward by the Secretary of State.

If Birmingham City Council is funding its local hospital, it might explain some of its problems. That is not a responsibility of the city council. I do not know how the right hon. Gentleman has the brass neck to stand and ask Government Members to retract comments when the note he left in the Treasury continues to hang like an albatross around his and his party’s neck.

I am grateful to the hon. Gentleman, who is being courteous and collegiate in giving way. He will also remember that I left a Budget that was going to halve the deficit over the course of the Parliament, which his Chancellor has still failed to achieve.

The right hon. Gentleman has obviously been to Specsavers—he has the rose-tinted glasses and he is looking through a completely different Labour history.