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Local Government Finance Settlement

Volume 633: debated on Tuesday 19 December 2017

With permission, Mr Speaker, I would like to make a statement on funding for local authorities in England next year.

From 2015 to 2020, councils in England have access to over £200 billion to deliver the high-quality services their local communities need. They deserve no less; local government is on the frontline of the country’s democracy, with councillors and officers working at the heart of the communities that they serve. But to make the most of that local knowledge, councils need greater control of the money they raise: they need greater freedom to tackle challenges in their areas, and they need the certainty and stability that will allow them to plan ahead.

This Government are committed to delivering that, and today I am publishing a draft local government finance settlement that marks an important milestone in the journey to doing so. It comes in the third year of a four-year deal that was accepted by 97% of councils in return for publishing efficiency plans. We will continue to work with the sector to help councils to increase transparency and share best practice, supporting greater progress in delivering increased efficiency over the coming year. I expect this to have a tangible impact on the steps that councils take to promote efficiency from 2019-20.

Local government operates in a society that is constantly changing, and the system of financing local government needs to reflect that. The current formula of budget allocations has served local councils and communities well over the years, but to meet the challenges of the future we need an updated and more responsive distribution methodology that gives councils the confidence to face the challenges and opportunities of the future. So I am today publishing a formal consultation on a review of relative needs and resources. I aim to implement a new system based on its findings in 2020-21.

Alongside the new methodology, in 2020-21 we will also be implementing the latest phase of our business rates retention programme, a scheme that gives local councils the levers and incentives they need to grow their local economies. The aim is for local authorities to retain 75% of business rates from 2020-21. That will be done through incorporating existing grants into business rates retention, including the revenue support grant and the public health grant. Local authorities will be able to keep that same share of growth on their baseline levels from 2020-21, when the system is reset. So from 2020-21 business rates will be redistributed according to the outcome of the new needs assessment, subject to suitable transitional measures.

A number of 100% retention pilots have already been announced and they will continue. A further pilot will begin in London in 2018-19, and we had intended that a further five pilots would begin that same year. However, interest in the scheme was such that we will now be taking forward twice as many as planned. I am pleased to announce today that the new pilots will take place in Berkshire, Derbyshire, Devon, Gloucestershire, Kent and Medway, Leeds, Lincolnshire, Solent, Suffolk, and Surrey.

The first batch of pilots is taking place largely in urban authorities; the second wave will mainly cover counties. This ensures that councils right across the country will benefit, that the scheme can be tested in a wide range of environments, and that the benefits of growth are broadly comparable between London, existing pilots and new pilots. We received so many applications to take part that we will continue the pilot business rates retention programme in 2019-20, and further details will be published in due course.

Over the past year, my Ministers and officials have been listening to councils of all shapes and sizes, understanding their concerns and working together to develop ways of tackling them. The result of those conversations is reflected in this draft settlement. For example, rural councils have expressed concern about the fairness of the current system, with the rural services delivery grant due to be reduced next year. So today I can confirm that I will increase the rural services delivery grant by £15 million in 2018-19, meaning that the total figure will remain at £65 million for the remainder of the current four-year settlement.

We have also heard concerns about the proposed changes to the new homes bonus. To date, we have made almost £7 billion of new homes bonus payments to reward the building of 1.4 million homes. Over £946 million in new homes bonus payments will be allocated in 2018-19, rewarding local authorities for their work on fixing our broken housing market. I have consulted on proposals to link new homes bonus payments to the number of successful planning appeals, and considered raising the NHB baseline. Following conversations with the sector, I have been persuaded of the importance of continuity and certainty in this area. So today I can confirm that in the year ahead no new changes will be made to the way in which the new homes bonus works, and that the NHB baseline will be maintained at 0.4%.

As I set out in the housing White Paper, local authorities will be able to increase planning fees by 20% when they commit to investing the additional income in their planning services. This is a significant step towards addressing widespread concerns about under-resourcing in local planning authorities. Following discussions with the sector, I am also announcing a continuation of the capital receipts flexibility programme for a further three years. This scheme gives local authorities the continued freedom to use capital receipts from the sale of their own assets. This will help to fund the costs of transformation and release savings.

One particular issue causing concern for some councils is so-called negative revenue support grant. This is where changes in revenue support grant have led to a downward adjustment of some local authorities’ business rates top-up or tariff for 2019-20. I recognise the strength of feeling in local government on this issue, and I can confirm that my Department will be looking at fair and affordable options for dealing with negative RSG. We will formally consult on proposals in the spring, so that the findings will be in ahead of next year’s settlement.

Of course, anyone who has spoken to anyone in local government will be aware of concerns about funding for adult and children’s social care. That is why, over the past 12 months, we have put billions of pounds of extra funding into the sector, and why the Department for Education is spending more than £200 million on innovation and improvement in children’s social care. In the spring Budget, an additional £2 billion was announced for adult social care over the next three years. Along with the freedom to raise more money more quickly through the use of the social care precept that I announced this time last year, we have given councils access to £9.25 billion of dedicated funding for adult social care over the next three years. However, we also need to find a long-term solution to challenges that are not going away. That is why we have already announced that a Green Paper on future challenges within adult social care will be published in the summer of 2018.

Finally, I am conscious of calls for further flexibility in the setting of council tax. We all want to ease growing pressure on local government services, but I am sure that none of us wants to see hard-working taxpayers saddled with ever-higher bills. This settlement needs to strike a balance between those two aims, giving councils the ability to increase their core council tax requirement by an additional 1% without a local referendum, bringing the core principle in line with inflation. We have abolished Whitehall capping. Under the Localism Act 2011, local government can increase council tax as it wishes, but excessive rises need to be approved by local residents in a referendum. This provides an important check and balance against the excessive increases that were seen under the last Labour Government, when council taxes more than doubled.

This change, combined with the additional flexibility on the adult social care precept that I confirmed last year, gives local authorities the independence they need to help to relieve pressure on local services such as adults’ and children’s services, while recognising that many households face their own pressures. In addition, directly elected mayors will decide the required level of precept by agreement with their combined authorities. I am sure that voters will be watching closely, as I will, to ensure that that freedom is not abused.

I can also confirm that the Government intend to defer the setting of referendum principles for town and parish councils for three years. This is subject to the sector taking all available steps to mitigate the need for council tax increases, and the Government seeing clear evidence of restraint in the increases set by the sector as a whole. I have also agreed measures with the Home Secretary to make it easier for police and crime commissioners to meet local demand pressures by allowing a £12 council tax flexibility for police services, raising an additional £139 million next year.

This settlement recognises the need to keep spending under control while also tackling many of the issues that have been raised by local government over the past year. Two years of real-terms increases in resources being made available to local government will give local authorities the funding and freedom they need to make decisions in the best interests of the communities they serve. It is a settlement that offers councils the resources they need, the stability they have requested and the fairness they deserve, and I commend it to the House.

I thank the Secretary of State for giving me a copy of his statement. I have had the briefest possible time in which to adequately consider its contents, but it was nevertheless given to me in advance.

I pay tribute to councillors and officers across the country who are on the frontline of this Government’s austerity agenda yet continue to serve our communities as well as they can. Many of them will have been looking to today’s settlement for assurances that the Government understand the challenges facing local government. Councils have already experienced unprecedented funding cuts since 2010, and since the general election, they have been left in the dark about the Government’s sustainable long-term funding plans.

The Secretary of State says that he is listening to councils “of all shapes and sizes”, but why must he exacerbate the rural-urban split? He has listened to Surrey—that much is clear—but in doing so, he has ignored the needs of Stockton, Salford and Sheffield. Before the general election, we had been promised a full legislative package to fund local government beyond the revenue support grant. Now, however, we have been promised not legislation but a consultation. Councils are desperate for additional funding, and they might well appreciate some of the piecemeal solutions offered by the Secretary of State today, but we are still without a sustainable plan or a vision for how the sector will be funded in the future. The Secretary of State notes that the aim is for authorities to retain 75% of business rates by 2020, and I look forward to hearing more details of how that will function, recognising that not every area has the ability to raise the income locally.

Many will have looked to today’s announcements to offer solutions to the crisis in children’s services, after the Chancellor failed to mention them in his Budget. Demand for children’s services is placing unbearable pressures on local authorities. Central Government funding to support children and their families has been cut by 55% over the past seven years—a total cut of £1.7 billion —forcing less money to be invested in intervention to cover the cost of emergency care. The result of these cuts has been appallingly clear—[Interruption]—if the Secretary of State chooses to listen. Cuts to early years intervention have meant a record number of children—some 72,000 last year—being taken into care. The number of serious child protection cases has doubled in the last seven years, with 500 new cases launched every day. More than 170,000 children were subject to child protection plans last year, which is double the number seven years ago.

The Secretary of State recognises the crisis facing children services, but he just brushes it aside. I suggest that he listens to Lord Gary Porter, who warned recently that both adult social care and children’s services were “at the very top” of the Local Government Association’s “worry list”, saying:

“If we don’t look after our older and younger people, it’s bad for our residents, bad for our communities and bad for our services more widely.”

It was important that today’s statement provided much-needed certainty to our communities. Instead, it acts merely as a sticking plaster and pushes the problems down the road for another Secretary of State to fix.

Our key tests for today’s announcement are whether it addresses the cuts to everyday services and properly funds councils to deliver those services in future, whether it assists the funding crisis in children’s services, and whether it fully pays towards local government staff getting a decent wage. It is interesting that the council-tax-raising flexibilities will not even cover the pay rise, which will itself place further pressure on the cutting of services. On the day that Labour’s shadow Health team announced that 2.3 million older people have been left with unmet needs, which is up from 1.2 million, another test is whether the announcement ensures that our aged and vulnerable people are supported and protected. In addition, does it ensure fair funding in the truest sense of the word “fair”? Does it address the uncertainty around RSG, recognising that areas with greatest social and health inequality are also the least able to fill the funding gap by other means?

The statement fails on all those counts. While today’s announcement offers some additional support, it merely pays lip service to many of the problems facing our local councils. The Secretary of State has today presented himself as Santa, but the details of the announcement really show him to be the Grinch.

I thank the hon. Gentleman for his Christmas spirit. Time and again, he stands at the Dispatch Box and says just one thing: he wants more spending. He wants more spending on police, fire services, children’s services, adult social care, sprinklers, pay and pensions—spending, spending, spending. It is the only thing he knows. However, not once has he appeared at the Dispatch Box or anywhere else to tell the country how he intends to pay for all that spending. The truth is that it is the same old Labour, and Labour is all about higher spending, higher taxes, higher debt—all the same polices that will take our economy down to its knees and crash it. It is the only thing that Labour knows.

I want to remind the House about what happened the last time Labour was in office. We had the deepest recession in almost 100 years, which destroyed the lives of so many millions of people in this country. Unemployment was 500,000 higher when the Labour Government left office than when they first came into office, ensuring that they delivered on the one promise of every Labour Government: they will always leave unemployment higher than they found it. Under the 13 years of Labour Government, council tax bills went up by almost 110%, and their measures contributed to the deepest budget deficit of modern times. We will take no lectures at all from the hon. Gentleman.

I of course recognise the pressure on councils, and we have done something about that in the settlement by increasing real-terms spending power for the next two years while ensuring that we maintain a balance between the need for councils to provide services and taxpayers themselves. The hon. Gentleman mentioned negative RSG, but perhaps he was not listening carefully because I said that I will be consulting early in the new year on options to deal with that challenge, which will be welcomed by the sector even it if it is not welcomed by him. He referred to the business rates retention pilots, suggesting that there was some political dimension to how they were chosen. He said that Sheffield and Stockton did not get a pilot, but it would have helped if they had actually applied for one. Councils need to apply for something before they can get it. He then mentioned Salford, but perhaps he does not know that Salford is part of a business rates retention pilot as part of the Greater Manchester region, which received a pilot earlier this year. It would really help if the hon. Gentleman did his homework before he appears at the Dispatch Box and starts making things up.

As for social care, the hon. Gentleman does not recognise that we have acknowledged the pressures, particularly the short-term pressures, which was why the spring Budget allocated an additional £2 billion. Together with the extra flexibility through the precept, that will lead to a real-terms spending increase in each of the next three years.

Finally, the hon. Gentleman talked about his tests, which included seeing whether local authorities are properly and fairly funded. The one thing he should know is that, in order to fund any public services fairly, including those provided by our excellent local authorities, we need a successful economy, which Labour will never deliver.

Order. As per usual on a matter of this kind, there is extensive interest in participating in the exchanges on the statement, so I will just make two points. First, people who arrive late obviously should not stand or expect to be called. Secondly, because of the pressure on time and the fact that there is another statement to follow, there is a premium upon brevity, which must be exhibited—even by a lawyer. I call Robert Neill.

I welcome the Secretary of State’s statement. Will he confirm that it is particularly important for councils with a long history of efficient financing and a low cost base, such as the London Borough of Bromley, that the review of relative costs and needs ensures that financial efficiency is properly incentivised within the local government finance system?

My hon. Friend speaks with experience as a former Minister in this Department, and I thank him for his comment. I can confirm that. This is all about efficiency and ensuring that local authorities have the right incentives, which is why our business rates retention plan, for example, will help to deliver just that.

I thank the Secretary of State for advance sight of his statement. On the distribution methodology, I am glad to see quite a long lead-in time for that and a consultation in advance of something being done. Will he tell us more about how closely monitored the business rates retention scheme will be to ensure that there is no gap between business rates and the revenue support grant? If a big business goes to the wall, a gap could suddenly appear in a local authority’s budget, so how does he intend to cushion the loss of a high-tariff business rates company in a council area?

How does the Secretary of State intend for local authorities that have already disposed of a lot of their assets to gain capital receipts, which are clearly a declining resource for some local authorities? What advice would he give to councils that have essentially sold off everything they can?

The Communities and Local Government Committee, of which I was a member in the previous Parliament, published a fair and reasonable report on adult social care, but the Government unfortunately did not accept all its recommendations. When the Secretary of State brings the Green Paper to Parliament, will he look again at some of those recommendations? Will he provide some more detail on why summer 2018 has been chosen? It is quite far away, and this Government have broad definitions of what seasons are in this place. Is there really a need to wait for at least another six months?

The hon. Lady raises several points, but I will try to answer them all quickly. It is important that we take our time to get the fair funding review right, and I think she would agree with that. Part of the process involves ensuring that issues are properly consulted on, which is why we launched the 12-week consultation today. On capital flexibility, it is important to give local authorities more freedom to raise funds, including capital funds. If they want—it is their decision alone—to sell capital assets and to use that funding more efficiently for local people, that option should be open to them, so guaranteeing that flexibility for another three years is important.

On adult social care, I welcomed the Communities and Local Government Committee’s report. It made a number of recommendations, including one about more short-term support, which is why the funding that we provided in the Budget, for example, earlier this year is important. As for the Green Paper, it is very important that we take the time to get things right, consult widely, try to work across different parties and listen to people as well as care users. By taking that time, we can come up with a more sustainable long-term system.

My right hon. Friend has mentioned that 97% of councils are in the third year of a four-year settlement. Will he therefore confirm the position for the small group of councils that refused to publish an efficiency plan? Will they be rewarded for their failure, or will they be penalised in the funding they receive under this settlement?

The reward for accepting the four-year settlement is actually for the local people those local councils represent. The councils that did not accept the four-year settlement—it was around 10 councils, so it was a very small number—should reflect on what that means for local people, because local people want to see certainty on the delivery of services. Those councils should certainly take a close look at that.

Order. I gently reiterate that those who arrived late should not stand. I have already made the point once, and it should not be necessary for me to make it again, but regrettably it has proved to be so.

I welcome some aspects of the statement, such as the increase in money from planning fees. On the flexibility on council tax increases, will the Secretary of State confirm the figures given to me by the Local Government Association that show that, even if the flexibility were fully used, it would raise just £250 million next year? That compares with the LGA’s estimate of the shortfall in funding for social care of more than £2 billion, even after the measures previously announced by the Government are taken into account. Will he also confirm that councils will raise very different amounts of money from such flexibility, depending on the size of their council tax base?

I always listen carefully to the hon. Gentleman, and I know he looks at these issues carefully. The extra flexibility on council tax means that the total core spending power this financial year of £44.3 billion will rise to £45.6 billion by 2019-20. That is an increase in real terms, so there will be real growth in core spending power in each of the next two years.

I welcome the Secretary of State’s confirmation of the continuation of the 100% business rates retention pilots in areas such as Greater Manchester. Does he agree that the success of business rates retention is key to continued growth in Greater Manchester and the success of the northern powerhouse?

Yes, I very much agree with my hon. Friend. We have already seen that the early pilots encouraged local authorities to think much more carefully about how they can attract local business, and we will see much more of that in the new pilots we announced today.

Thirty per cent. of Liverpool’s children are now in poverty, and the council is set to lose 68% of its budget by 2020. What is the Secretary of State going to do about the looming crisis in children’s social care? It did not even get a mention in his statement.

I gently say to the hon. Lady that I did talk about social care and children’s social care in my statement, and I certainly highlighted the additional funding that is being provided over the short term, including the £2 billion in the spring Budget. She mentions Liverpool. Based on what I have shared today, and if Parliament votes through the draft settlement, there will be an £8.7 million increase in her local authority’s core spending power, which it can decide to use as it wishes.

My right hon. Friend will know that, last Thursday, there was a local referendum in Christchurch in which more than 17,600 people voted against the abolition of Christchurch Borough Council. He has given the council only until 8 January to make an alternative submission. In the light of the financial implications of his announcement today, will he extend the period so that the implications of these important changes, which particularly affect rural Dorset, can be taken into account in making that alternative proposal?

We are not looking to extend that period. However, we will listen carefully to what Christchurch Borough Council has to say following the referendum. As I have said right from the start, at this point it is a “minded to” decision. There is no final decision, and it is important that we listen carefully to everyone, including of course Christchurch Borough Council.

What planet does the Secretary of State live on? How can it be right that Birmingham loses £700 million, the biggest cut in local government history, and that every household in Birmingham loses more than £2,000, yet the leafy Tory shires of Surrey and Sussex and the Prime Minister’s constituency of Maidenhead gain at the expense of Britain’s second city?

What the hon. Gentleman fails to mention, and it is not surprising, is that Birmingham has one of the country’s highest core spending powers per dwelling. If it were a better-run local authority, it would be able to do a lot more with that money.

Seven of the business rates retention areas mentioned by the Secretary of State are counties, so I was disappointed that West Sussex was not named as one of those areas, despite the strong bid by the district and county councils. With education pressure in the county, can I have early consideration of West Sussex being allowed business rates retention in the near future?

There were, I believe, 27 bids for the new pilots. As I mentioned, we intended to have five pilots, which we managed to increase to 10. I know the decision will still disappoint some colleagues, which is why I also announced today that we will be taking many pilots forward into the following year and announcing further pilots early in the new year.

Given that Halton Borough Council will have had its budget cut by £61 million by 2020 and that Cheshire West and Chester Council faces a further £57 million-worth of cuts, how does the Secretary of State propose that they provide vital services to the most vulnerable residents and constituents in Weaver Vale?

I know that the hon. Gentleman will never want to be my friend and share a beer with me, but he should be pleased that, under the draft settlement, the Halton unitary authority will see a £1.7 million increase in spending power, which I know will be welcome.

I have just noticed that two Government Whips are wearing identical ties, which takes the concept of party discipline to a new level. I am not sure whether to be encouraged or appalled. I leave it to colleagues to make their own judgment, political and aesthetic.

I declare my interest as a member of Kettering Borough Council.

Northamptonshire County Council might be the local highways authority, but it has run out of road. The council will set a legal budget for 2018-19, but it has made it clear that it will not be able to finance its statutory functions in 2019-20 unless something changes. Part of the solution is obvious to many local councillors: local government needs to be restructured in the county. Will the Secretary of State encourage the presentation of such proposals for his consideration?

The proposals in today’s statement will lead to almost £13 million of additional funding for Northamptonshire County Council, which I know will be welcome. My hon. Friend makes a wider point about longer-term sustainability, and he will know I am ready to consider any proposals on restructuring from Northamptonshire County Council or other local councils in the area. I will take such proposals seriously if they come forward.

Halton Borough Council has had a 60% cut since 2010, and it is struggling to ensure it has enough money to fulfil its statutory responsibilities. If the funding situation continues as it is now, the council will have a real problem in future years. What is the Secretary of State doing to consider smaller unitary authorities such as Halton that have a very good record on efficiency but are struggling with the current financial settlement? He did not set out today any sustainable financial help for local authorities such as Halton, or any financial funding solution for local government in general.

The hon. Gentleman will know that other council areas have come forward with restructuring proposals, and we are looking at having a bottom-up approach. If a local authority area has an idea and it wants to restructure, it should approach us. The Dorset region was mentioned earlier. We are looking at a proposal on that region, which includes some smaller unitary authorities as well. We want a bottom-up approach where these ideas are put to us and we will give them active consideration.

On children’s services, may I urge my right hon. Friend not to take lectures from the Labour party but to look at what is going on in Conservative-run North Lincolnshire Council, where we have turned children’s services around to such an extent that they are one of only three to be rated as outstanding? There is a particular emphasis on the social enterprise PHASE, which is helping young people on a ladder into permanent accommodation and tenancies when they leave. May I urge him to visit North Lincolnshire to see the incredible work that has been done to help young care leavers in our county?

I would be happy to visit North Lincolnshire. The council is doing an excellent job. I am sure that it will be pleased at today’s announcement that it will be part of the Lincolnshire business rates retention pilot.

Having had one of the deepest cuts in Government support in the entire country, leading to the closure of the entire youth service and cuts of more than a third in children’s services, Westminster City Council has announced plans for a voluntary levy on properties worth more than £10 million. What assessment has the Secretary of State made of making contributions to local taxation from the super-rich, in effect, a matter of personal choice?

First, the hon. Lady will know that, because of the disastrous state the economy was left in by the Government she supported, all local authorities, not just Westminster, have had to learn to spend money more wisely. With this settlement, Westminster, like other local authorities, will see an increase in spending power. If Westminster wishes to come forward with a voluntary plan that it wants us to consider, it should submit it to us.

The business rates retention pilot for Suffolk is very welcome news, but residents in county areas such as Suffolk are facing significantly higher council tax burdens. Will the Secretary of State assure me that the fair funding review is going to be progressed with real urgency?

I can absolutely give my hon. Friend the assurance that we are looking seriously at fair funding issues, which is why today’s launch of the consultation is an important step. Over the next 12 weeks, we will look at the cost drivers, which will have a direct input into the outcome of that review, making sure that all local authorities are funded on the basis of their actual needs.

Surely the Secretary of State will agree that any funds available should be allocated on the basis of need and evidence. He is surely not going to look at what he did previously, when he used the transitional grant scheme and a large lump of money mysteriously found its way to wealthier areas, bypassing the midlands, the north and cities such as Nottingham. The National Audit Office criticised the opacity and political allocation of that. He is not going to use that discredited ruse again this year, is he?

There would have been less of a need for a fair funding review to make sure that funding is allocated based properly on needs if the last time it was done, in 2007, it had been done properly and had actually been based on needs. I agree with the hon. Gentleman’s central point, which is that we need to look again at how funds are allocated to make sure that that is done on the basis of need. That is why I think he will welcome today’s consultation.

I thank my right hon. Friend for his statement on flexibility on the police precept, but may I ask him to consider some flexibility on the county council precept for care, as counties such as Staffordshire, which have kept their costs to a minimum over the years, are at a disadvantage with the percentage-based increase, as opposed to a flat-rate increase?

I assure my hon. Friend that care, be it children’s social care or adult social care, is at the forefront of our mind when looking at this settlement and making sure that the resources that are needed are in place. That is why we have the increase announced at the spring Budget, with half of that £2 billion coming this financial year. As for Staffordshire, it has that extra flexibility, like other councils, but this settlement will also lead to an additional £10.6 million, which I am sure will be welcome.

Has today’s announcement actually reversed anything in the long-term tendency to punish more deprived areas in this country?

What today’s announcement has done is make sure that local authorities have the resources they need to look after their local communities.

I welcome the fact that progressive councils such as Rugby Borough Council will continue to receive incentives to provide much-needed new housing through the retention of the new homes bonus. Will the Secretary of State also confirm that they will be rewarded for doing the right thing by continuing to make available adequate land for commercial development?

Yes, my hon. Friend raises an important point. We had a number of representations from local authorities for us to provide some continuity and certainty on the new homes bonus, which is exactly what I have proposed today. I hope that continues to lead councils such as Rugby, and others, to plan for the homes and commercial property that local communities need, so that they can have stronger local business and enterprise.

Cash-strapped Wirral Council has found more than £300,000 to deal with the consequences of the New Ferry explosion. So far the Government have not done enough. Will the Secretary of State update me as to their response to Wirral Council’s rebuild plan for New Ferry?

I am determined to try to help with that disaster and help the council deal with it. The council would have helped itself by presenting its business case a lot earlier, and not taking months and months to put it together. The council should show better efficiency with the public money it has. For example, it could stop spending 240,000 a year on a local newspaper publication. Things like that would help build local confidence.

May I invite the hon. Member for Birmingham, Erdington (Jack Dromey) down to East Sussex, as I am not sure I recognise the picture he was painting? East Sussex County Council has made £110 million in savings, it has allocated its reserves, it does not have a great business rate yield and many constituents of Members in this House will retire in East Sussex. Is it time to look at having the social care model along the lines of the NHS and consider centralised funding?

First, I join my hon. Friend in congratulating East Sussex on its approach to the challenges it faces, including on social care. It is a great place to retire, which leads to changing demographics. That is one of the things that will be looked at by the Green Paper we will publish next summer.

On the formula for transitional funding, what consideration is given to the percentage of core spending a council derives from revenue support grant? In Durham’s case it is 14.3%, whereas in Surrey’s it is 3.5%. That meant that last year core spending in Durham fell by 1.2%, whereas in Surrey the figure was 0.1%.

The hon. Gentleman will know that for various reasons, over a number of years, councils have had a different proportion of central grant versus funds that are raised locally, for example through business rates. It is important to take that into account for all councils. What really matters is their core spending power: all the sources of spending power they have. He will be pleased to know that with today’s proposal there will be an increase for Durham of £5.6 million, which is 1.4%.

I certainly welcome a fundamental review of local government finance and, in particular, the fairer funding commitment, but is there any help coming down the track for local authorities that are particularly affected by the issue of unaccompanied asylum seeking children, which places a cost pressure on those local authorities, such as Northamptonshire County Council?

I am pleased that my hon. Friend has raised this issue. I recognise the good work that so many councils do to look after unaccompanied asylum seeking children, who are some of the most vulnerable people in our society. One thing I am doing today is making an additional £19 million available for next year to help the local authorities most affected to help some of the most vulnerable people.

The modification of the 2016-17 allocation formula to take account of councils’ ability to raise council tax was at least the start of an acknowledgement that councils with the highest levels of deprivation should not face the biggest cuts. Nevertheless, will the Secretary of State take it from me that the failure to address that issue in the previous two years has meant that Birmingham is now being short-changed to the tune of £100 million? What is there in his statement to address that and avoid even more swingeing cuts hitting children’s services and adult social care in my city?

The hon. Gentleman’s central point is that there has to be a recognition that different councils have a different council tax base, and so are affected in different ways when they make a percentage change to that council tax. In the case of Birmingham and many other local authorities in which the council tax base might be relatively low, that is recognised so that with respect to, for example, adult social care, when new funding is allocated, including the additional £2 billion announced earlier this year, the improved better care fund makes sure that the fundraising powers that exist locally are taken into account.

Deprivation is by no means limited to urban areas, and I know that that is why the Secretary of State has listened to the powerful fair funding case made by Lincolnshire County Council. I welcome the fact that the business rates pilot is coming to the county, but will my right hon. Friend tell us how else such big, sparsely populated counties will be helped by the settlement? What more money is coming to Lincolnshire?

The business rates pilot will certainly help Lincolnshire and give it more incentives to attract more local business. Today’s announcement of an additional £15 million for the rural services delivery grant will help Lincolnshire and many other local authorities. If we exclude any extra income from the business rates pilot, today’s announcement will mean £11.5 million of additional spending power for Lincolnshire, which I know will be welcomed.

Whether it is the community protection officers who keep our neighbourhoods safe, the social workers who protect vulnerable children or the workers in libraries, museums, schools and day centres, local government staff are working harder than ever and deserve a pay rise. What resources will the Secretary of State provide to ensure that councils can afford to give them one without making even deeper cuts to services?

I can mention a few changes that will help local councils to deliver services: the increase in the police precept, on which there will be a further statement after this one; the adult social care funding that was provided in the Budget; and today’s announcement of additional flexibility in council tax.

I share the disappointment of my hon. Friend the Member for Crawley (Henry Smith) that West Sussex is not included in the business rate retention pilots. I welcome the consultation, but will my right hon. Friend make sure that it recognises the hidden deprivation in many coastal communities, such as mine in Sussex? We have a much larger elderly population with a dependence on social services and the health service, lower-skilled jobs and higher-needs children, and those things often get overlooked.

My hon. Friend is absolutely right to make that point, which is precisely one of the reasons why we need to conduct a fair funding review and why I have launched the consultation today. I encourage West Sussex council to input into the consultation and provide more data on the increased deprivation that sometimes happens in coastal communities so that we can get the formula right and help places such as West Sussex.

The Secretary of State’s birthplace, Rochdale, has lost £176 million from local government spending, which has had a real impact on children’s services and adult social services. The reality is that, with local people already hard pressed, Rochdale’s capacity to raise new money by increasing council tax is not anything like as significant as it is in places such as Surrey. Will the Secretary of State tell the House whether, under his fair funding review, the Rochdales will end up in the same advantageous positions as the Surreys?

The hon. Gentleman will understand that the purpose of the review is that it is based on evidence, and I am not going to pre-empt that. We will take our time to get it right. If Rochdale has a case to make, it should certainly respond to the consultation I launched today. Rochdale is part of the business rates retention pilot, and I know it welcomes that. When we allocate new funding for things such as adult social care, other fundraising powers are taken into account.

With local authorities being given greater resources, powers and flexibility, what are the Government doing to share best practice to make sure that taxpayers’ money is spent wisely?

We do a number of things to try to encourage efficiency. The four-year settlement essentially requires of each of the 97% of authorities that accepted it an efficiency deal with the Government, through which we want to be convinced that those authorities are doing all they can to spend taxpayers’ money more wisely. We also work with the Local Government Association to share practice, which I know much of the sector welcomes.

Social care in Birmingham is in crisis now, and it is facing an £800 million black hole. How is a Green Paper in the summer next year going to help people who need care now?

The hon. Gentleman will know that the extra funding that we have announced for social care this year and the extra flexibility in the adult social care precept is helping up and down the country, including in Birmingham. The Green Paper is essential to ensure that we have a longer-term, sustainable model that deals with the increased demand that we see and is something on which we can all rely.

The Secretary of State mentioned Lincolnshire among the places where there will be new business rate pilots; will he clarify whether that includes the two unitary authorities of North Lincolnshire and North East Lincolnshire as well as the county council? With respect to the devolution deal for Lincolnshire that failed earlier this year, will he confirm that he would be prepared to look again at another proposal that would provide additional funds for coastal communities such as Cleethorpes and, indeed, Skegness?

I can confirm to my hon. Friend that the Lincolnshire pilot includes North East Lincolnshire and North Lincolnshire. I can also confirm that when we are looking into the fair funding review, starting with the consultation announced today, we will certainly consider the special needs of coastal communities.

If the Secretary of State cannot persuade the Treasury to fund local government adequately, will he let me know which services he would personally advise councils to stop providing?

I want local authorities to decide for themselves how best to deliver local services and respond to the needs of the local community. It is my job to make sure that they are properly resourced and, with the measures we have taken this year, including the proposals I have announced today, that is exactly what they have: the resources that they need.

In certain circumstances, councils can still make substantial savings. In Cumbria, the Labour leadership on the council has failed to reach a devolution deal, which was an opportunity to review local structures that could have saved millions of pounds for local services. Does the Secretary of State agree that fewer councillors and councils in Cumbria would benefit local services enormously?

My hon. Friend raises the issue of restructuring. Whether it is about changing council borders or the number of councillors, we will look at the proposals that are put to us. They must be bottom-up proposals, but we would look actively at any such proposals.

On 8 March, the Chancellor announced a complete review of business rates, not just a redistribution. In places such as York, the valuation rates are so high that it is pushing businesses out of business. How will the Secretary of State’s process interface with the Chancellor’s?

I remind the hon. Lady that when the revaluation happened, it came with £3.6 billion of transitional funding, which will help throughout the country. She is right to ask about some of the longer-term issues relating to the structure of business rates. It is for the Treasury to respond on that and certainly on the timing of any future review. The pilots announced today are part of a plan to make sure that, whatever their future structure, if business rates can be retained more locally, that will give local councils the right incentives.

The Secretary of State did not decisively address the question of my constituency neighbour, my hon. Friend the Member for Nottingham East (Mr Leslie), about the transition grant. Perhaps I will have more luck. If the transition grant is to remain, will the Department for Communities and Local Government—after two years of repeated requests from Nottingham—publish both the formula and the assumptions that sit behind it?

The Care Quality Commission’s local system review of adult social care in Trafford, which I received this week, says that investment in social care was not as much as it should be, while, at the same time, the council was trying to transform social care. Delayed transfers of care are very high in the borough. Will the Secretary of State say whether Trafford Council has been adequately funded both to maintain social care as required now and for transformation in the future?

Trafford is a very well run council, which can set examples for many others in that area, but, like many, it is having to deal with added pressures, including on social care. I know that it has certainly welcomed the additional funding that we announced earlier this year, and the flexibility that I announced this time last year.

In his statement, the Secretary of State said that local government is at the frontline of the country’s democracy, yet he is systematically dismantling council services. The spending power of my own local authority of Derby has been reduced by £161 per head since 2010. The latest iteration of that is that it is giving its libraries to the voluntary sector to run. Is the Secretary of State trying to finish the job that was started in the 1980s by his predecessor, Nick Ridley, who said that his idea of a good council was one that met once a year to dish out the contracts to the private sector?

Derby, like many local authorities, will be welcoming—I hope—the part of the settlement where we have announced additional funding. In the case of the hon. Gentleman’s local authority, Derby will be getting an additional 1.5% increase in its core spending power, which will lead to £2.7 million of additional spending, and it can use that on libraries as it wishes to look after local people’s needs.

Further to the very serious concerns raised by a number of my hon. Friends about cuts to children’s services—more pronounced in many areas because of the cuts by this Government and the fact that the weighting for deprivation was taken out of the local funding formula—Liverpool has seen a 9% increase in the number of looked-after children. Despite significant investment, we are facing a black hole to the tune of millions of pounds. How will the Secretary of State ensure that children in my constituency and across the country will be kept safe?

Liverpool, like many local authorities, is dealing with many pressures. That is why there is a lot there to help it. It already has one of the highest core spending powers per dwelling in the country and, from this set of proposals today, it will see an £8.7 million increase. On top of that, it is also part of the business rates retention pilot.

I welcome the inclusion of Gloucestershire in the pilots, but will the Secretary of State ensure that the county’s MPs have the opportunity to look at the operation of the pilots as part of discussions with the Department for Communities and Local Government, and will he say that these pilots do not preclude local government reorganisation if and when that comes to Gloucestershire?

No pilots preclude any kind of reorganisation. It is up to that local area to decide whether that is something it wants and to put a proposal to me. I know that the business rates pilot is very welcome in the Gloucestershire region; it will give more incentives to help local businesses. On top of that, today’s announcements will lead to an increase of £9.2 million of additional spending power for the local authority, which I know will be welcome.