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House of Commons Hansard
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Local Authority Financial Sustainability: NAO Report
20 March 2018
Volume 638

[Mr Nigel Evans in the Chair]

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I beg to move,

That this House has considered the National Audit Office report on the financial sustainability of local authorities, HC 834.

It is a pleasure to serve under your chairmanship, Mr Evans. I will start by doing something very simple that we do not do enough in this place, or in the political world more broadly: saying thank you. I want to say thank you to our councillors, mayors and local government staff. [Hon. Members: “Hear, hear.”] As a former councillor, I know that local government holds our communities and services together and makes our towns and cities what they are. Our local government leaders take decisions and hold responsibility for budgets that directly affect their constituents just as much as, if not more than, many Members of Parliament. They deserve more recognition and respect for that than they are sometimes given. However, since 2010 their very challenging job has become almost impossible. The National Audit Office report makes it clear that funding has been cut by nearly 50%.

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I thank the hon. Gentleman for securing this important debate. The Times, which is not known for its hyperbole, stated recently in an editorial:

“All politics is local, and local government is going bust”.

Does he agree that the Government are culpable and must take responsibility for their funding decisions, and that it is down to them to stop local government going bust?

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I do. As a result of that 50% cut, services have been drastically reduced. Pressures and demands are increasing, but the Government have failed year after year to provide councils with fair and sufficient funding.

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Will my hon. Friend give way?

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I give way to my colleague and constituency neighbour.

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I congratulate my hon. Friend on securing this important debate. He knows that Halton Borough Council, which serves our constituencies, is under extreme pressure. It is one of the smallest councils, and its budget will have been cut by nearly 60% by the end of the Parliament. Does he agree that that puts the council’s sustainability and its ability to deliver its statutory duties, particularly for social care, at great risk?

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Of course. Things have been particularly difficult for local children’s services and adult services, about which we have recently lobbied Ministers.

Some 66.2% of councils now have to use their reserves for social care provision. These figures are not mine or the Labour party’s; they are in the National Audit Office report. Last year local authorities overspent by £901 million. Minister after Minister has ignored the crisis or tried to pretend that using calculations such as core spending power can somehow mask the level of the cuts that councils face, especially those in highest need.

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I congratulate my hon. Friend on securing this important debate and echo his thanks to our councillors and local government workers. Does he agree that it is outrageous that my local authority, Barnsley Council, faces cuts of 30% between 2015 and 2020? Such cuts put an unfair burden on local authorities and have a significant impact on local services. It is clear that the Government should take responsibility and do something about that.

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I agree. It took the Conservative leader of Surrey County Council to threaten a referendum on a 15% council tax rise to get any response at all from the Government. Even then, they just placed further accountability on local taxpayers. I am surely not the only person who was a little concerned that a financial crisis so grave that it required a 15% council tax rise in one of the wealthiest areas of the country appeared to go unnoticed for so long by so many local MPs. It is all the more worrying that those MPs include the Minister of State for Housing, Communities and Local Government, Ministers of State for Education, the Secretary of State for Health and Social Care, and the Chancellor of the Exchequer. Is it any wonder that Ministers do not appear to realise that we have a cash crisis in councils, schools and the NHS?

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The NAO report shows that the number of looked-after children has increased by 10.9% since 2010, but the Chancellor failed to offer local authorities any additional support to address that in the Budget or the spring statement. Does my hon. Friend agree that the Government must act to provide more funding to support looked-after children?

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Certainly. In fact, there will be a £2 billion shortfall by 2022, so there is a real crisis in children’s services.

One of the other Surrey MPs happens to be the Environment Secretary. Given his experience of dealing with the outcomes of difficult referendums, I cannot imagine why he was not keen to support that one.

Many colleagues in the Chamber and beyond will know that although cuts have hit the poorest areas hardest, the damage is not limited to them, as the Local Government Association rightly points out. Rising pressures on social care, transport and other services cut across borough and political boundaries. As such, I wish the Defence Secretary all the best with his petition to save bus services in Staffordshire—I hope he gets a sympathetic ear from the council. Many in the Chamber might have been a little surprised that he addressed his concern locally rather than nationally, where the real fault lies, but raising it nationally might have resulted in the Chancellor informing him to shut up and go away—a statement that the Defence Secretary is all too familiar with.

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I, too, congratulate my hon. Friend on securing the debate. We both served on Manchester City Council, a great council with great leadership that has been devastated by cuts. Greater Manchester leaders say that they may be close to bankruptcy in four years if Government cuts continue in the same way. Does he agree with the report’s finding that, instead of blaming councils, the Ministry of Housing, Communities and Local Government should recognise that it has failed in its duty to monitor and mitigate the impact of budget cuts on our local authorities?

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I agree with my hon. Friend and former colleague on Manchester City Council.

Councils of all colours and types are near breaking point. Indeed, Conservative-run Northamptonshire County Council has already reached that point, although, as the report shows, any suggestion that its funding challenges are unique is wide of the mark. Some 10.2% of local authorities have less than two years’ reserves. They are at breaking point, and we could face another 15 being served with section 114 notices. It is only through the sound financial management of most councils that we have not seen more local authorities topple.

Warnings have come from councils across party politics and from the cross-party Local Government Association. The National Audit Office report confirms what those at the frontline of local government have been saying for years: funding is down by almost 50%, while demand for services such as adult and children’s social care and homelessness support rises. Lack of central Government support has meant that the tax burden has shifted to local taxpayers. The National Audit Office concludes that:

“As funding continues to tighten for local authorities and pressure from social care grows, there are risks to statutory services.”

Those findings are stark and should alarm us all, and not just in politics but well beyond. The picture that the report paints is familiar to Halton Borough Council and Cheshire West and Chester Council in my constituency, as it will be across the country. Pressures on some areas of children’s services have increased by 26% in Cheshire and by 83% in the more deprived Halton, as my hon. Friend the Member for Halton (Derek Twigg) pointed out, yet the recent Budget failed to offer more money for that vital area of responsibility. That would be damaging enough when taken in isolation, but when we consider the human and future economic costs of failing our vulnerable children, it is truly damning. By 2020 the shortfall for children’s services will be a massive £2 billion.

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One of the great problems for many children’s services departments operating in areas of high housing cost is that it is particularly difficult to recruit staff. We have a severe problem with that in Reading. We are outside the boundary for outer London weighting, which stops at Bracknell, even though that is an area of lower housing costs, and we suffer from a severe shortage of skilled workers to work in our children’s services departments. I understand that is a common problem for local authorities, and particularly for those in areas of high housing costs. There are issues with both pay for staff at those grades and the ability of local authorities to provide their own council housing. Reading had a plan to build 1,000 council houses, which sadly was stopped by George Osborne. Would my hon. Friend like to comment on the twin problems of low pay for key staff and the inability of local authorities to build housing for them?

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Indeed, those factors are highlighted in the report. Perhaps its most concerning aspect is the finding that the Government do not have a long-term funding plan for local authorities. That confirms the fear of many councillors and mayors I have spoken to. They have been offered no clarity about how 100% business rate retention will work, especially for those areas that will be net losers. Other councils talk of reaching a cliff edge in 2020.

My question to the Minister is simple. Does she have a long-term funding plan for local authorities and, if so, what is it? Councils need to know now. At what stage in the near future will she legislate to ensure that local authorities can use 100% of the money they raise locally for the good of their residents? If she cannot give our councils the stability and guarantees they need, she should not be surprised if future ambitions around homes, schools and services fall even further short of the mark than they do now. Between 2010 and 2017, spending fell on planning and development by 52.8%, on housing by 45.6%, on culture by 34.9%, and on highways—we are all familiar with potholes and everything else—by 37.1%. Again, those are not Labour party figures, but figures from the National Audit Office report.

A national Government who try to lecture local government about financial stability and saving for the future have no credibility to do so when their own watchdog makes such a serious statement about their short-sighted approach. The status quo can no longer continue. Our councils, our communities and the dedicated staff who work in them deserve and demand better.

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I thank my hon. Friend the Member for Weaver Vale (Mike Amesbury) for securing this important debate. In February I asked the Chief Secretary to the Treasury how my authority is expected to meet the rising demands of adult social care and children’s services, despite devastating funding cuts. She argued that councils have been given the ability to increase council tax levels to pay for those services. However, that new flexibility—namely, to increase council tax to pay for social care, as my council has had to do—and indeed the introduction of the improved better care fund, have associated conditions that might limit the flexibility of some local authorities to spend on social care funding as well as local priorities, thus disproportionately harming low-income families. Austerity is expensive. It has not tackled the deficit; rather, it has passed it on to public services.

In March 2018 the National Audit Office reported that many local authorities rely on their savings to fund local services and increasingly find themselves in an unsustainable financial position. We cannot keep cutting their funding and expect them to do more with less. In my constituency there has been a real-terms cut of 10.6% in adult social care, almost double the national average, and the Government have committed no further funding for social care in the Budget. The money offered to councils in the local government finance settlement is nowhere near enough to calm the crisis.

My constituents have repeatedly described social services as a nightmare. In Peterborough, 17,638 people are over the age of 65 and, of them, 2,171 are unpaid carers and 6,802 live alone. Cambridgeshire and Peterborough clinical commissioning group would have received an extra £30.3 million if it was funded in line with the national average. The CCG was ranked 204th out of 207 for the level of funding received from NHS England.

Services are overstretched, and the recent trends in the level of funding are unsustainable and unacceptable. Peterborough’s needs have been attended to on the cheap for far too long. As a consequence, cracks are beginning to appear in our services. Our needs have not been properly or adequately addressed, and the current settlement is blatantly below par.

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I thank my hon. Friend the Member for Weaver Vale (Mike Amesbury) for securing the debate. My constituency covers both the Conservative-controlled East Riding of Yorkshire Council and the Labour-controlled Hull City Council, and the messages coming out of both councils are very similar. This is not fake news. Instead, it is the hard truth and reality of the cuts faced by both councils.

Hull City Council’s social care spend for equates to 60% of its entire budget, and it is rising as a proportion of its total spend by 4% to 5% every year. It told me that it spends 37% of its total budget just on adult social care. It spends 23% of its total budget on children’s services. Yet since 2010 the council’s budget has been reduced by a staggering £126 million. This year it received £5.3 million less than it did the year before. Is it any wonder that it does not have the money to repair the potholes in the roads, or to invest in many other needed services?

Recently we had a situation in which Hull City Council was desperately trying to move money around to fund the rising demand and cost of adult social care and children’s services. One of the things it was looking at having to cut was its peer-to-peer support for breastfeeding mothers. In the end, it was able to find some money, but that means money coming from elsewhere. When I talked to the council about that, it was not because it wanted to take support away from breastfeeding mothers, but because every choice is an impossible choice. Either it takes money away from supporting breastfeeding mothers, or it cannot give it to support homeless projects in the constituency, to repair the play equipment in the parks or to deal with the increasing pothole problem. Every choice the council makes is an impossible choice.

Hull West and Hessle is a wonderful place to live, with great people. I am particularly delighted to see two of my constituents sitting in the Gallery and delighted that they can be here today. We are very proud of where we live, but we would be lying if we said that it did not have some significant problems. It is the third most deprived local authority in the whole country. A report by End Child Poverty has revealed that more than 20,000 children in Hull are living below the poverty line. That is one third of all the children in Hull living in poverty. In East Yorkshire, over 20% of children live in poverty.

As austerity continues to bite, the demand for social care continues to grow and Hull City Council simply does not have the council tax base from which to fund it. Some 68% of properties in Hull are in band A. We would be hard pushed, looking around our surroundings here in Westminster, to find a single property that is anything below band C. The number of people over 65 in Hull is forecast to increase by 6% by 2020, which of course will increase demand, but only 7% of people needing adult social care can self-fund it; everybody else is reliant on the council. Two thirds more residents in Hull require social care compared with the national average.

The picture I am trying to paint for hon. Members is of a city that simply does not have the ability to raise its own money to fund a problem that is greater, and growing more quickly, than in many other parts of the country. Hull City Council will get the lowest amount per head from the social care precept of any Yorkshire and Humber council. It has a very low tax base. If people want to raise the precept by 1%, fine, but in Hull that will raise £2.90 per head, compared with £7.08 per head in the City of London. They simply cannot be compared. Hull City Council is 81% reliant on the revenue grant from Government. It does not have the ability to self-fund, but still, even with all these problems so clearly laid out, it will have to cut another £16 million from its social care budget, or find cuts in all the other budgets.

It angers me that there are Liberal Democrat councillors in Hull criticising the council for making those cuts and for the consequences. I wonder how long their memories are. I wonder whether they remember that they were part of the coalition Government who in 2010 voted through all those cuts. When they stand there and criticise Hull City Council for not being able to repair the parks or the potholes, I wonder whether they could cast their minds back to being the people who took away that money in the first place.

Conservative-controlled East Riding of Yorkshire Council has said that the additional £2 billion for adult social care announced in the 2017 spring Budget was welcome, but said,

“if it is the Government’s wish to continue to safeguard some of the most vulnerable people, this scheme needs more investment and the human cost of failure in such an essential service is huge.”

That is a quote from the Conservative-controlled East Riding of Yorkshire Council. Even that council says that it does not have the funds needed. I know it has already spent all the reserves it has. Where is it going to find the money from in the future? It wants the Government to look at extending the additional £2 billion beyond 2019-20.

Cities such as Hull, with high needs, significant deprivation and a very low tax base, have limited ability to generate income. It is therefore essential that the Government’s future financial settlement calculations recognise and make allowances for those differences, challenges and variations. It is positive that the National Audit Office recommendations seem to be informed by a realistic understanding of the national position facing local authorities. If the recommendations were implemented in full, there would hopefully be some potential improvement.

While councils and their partners are making and continue to make strenuous local efforts to protect statutory services and to cope with the great pressures affecting children’s services and adult services in particular, it is simply the Government who must ensure that the national system is fit for purpose. People in Hull West and Hessle are tired of “make do and mend.” They are tired of tough and impossible choices. As East Riding of Yorkshire Council put it, “Salami slicing from other grant streams is not sustainable.”

We want our roads fixed, we want our parks to have new equipment and I know how much Friends of Pickering Park want their aviary back, but none of that can happen with the year-on-year cuts at the same time as the rising demand. My constituents deserve so much more. There is no justification for the continued underfunding, and the previous Liberal-Tory coalition’s mantra, “We’re all in this together,” just rings empty. It is time to end austerity, implement the National Audit Office’s recommendations and fund our local councils properly.

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I am delighted to serve under your chairmanship, Mr Evans. I congratulate my hon. Friend the Member for Weaver Vale (Mike Amesbury) on securing this important debate. It is a shame that we will not even hear a Tory Back-Bencher heckle, never mind make a speech or an intervention, because not one has turned up to speak on behalf of their local councillors in this important debate.

As others have identified, the National Audit Office report raises grave concerns about the sustainability of local authority finances. Even more worryingly, this Government show no sign of changing direction, regardless of the consequences. The spring statement showed that there is no plan to abandon the austerity project, meaning that services delivered by local councils will be put under even more pressure. This Government have presided over the slowest recovery since at least the 1920s. Austerity has not tackled the deficit; it has passed it on to public services and plunged them into crisis, from the NHS to schools, to councils even going bust.

The Tory cuts to local government are deeply unfair, hitting the most deprived councils with the greatest need the very hardest. Since 2010, Liverpool’s funding has been cut by a staggering 64%, or some £444 million, and council services have lost 3,000 staff. Those cuts have stripped our communities bare and left our services stretched to the limit. One of the biggest financial pressures on our councils nationally is adult social care. More than 400,000 people can no longer access social care, which faces a £2.5 billion funding gap by 2020. The other main growing pressure on council budgets is children’s services. The number of children taken into care is at its highest since 1985, yet, according to the National Children’s Bureau, more than one in three carers are warning that cuts have left them with insufficient resources to support those children.

Liverpool City Council has rightly shielded those services as much as possible from the full force of Government cuts, but that means that funding for other vital services is being squeezed, from housing to road maintenance to refuse collection. Cuts combine and converge to create increased hardship, risk of homelessness and pressure on other services. Liverpool City Council’s impact analysis shows that the biggest impact is on disabled people, women, families with children, younger people and social sector tenants aged between 40 and 59.

The council has set aside £50 million to protect the most vulnerable, including £11 million to tackle homelessness, which has more than doubled under this Government; £3.3 million for discretionary housing payments for those affected by botched welfare reform and hardship—70% of which are because of the bedroom tax alone—and £3.1 million for crisis payments to help with the cost of food, fuel, clothing and furniture. I could go on.

It is right that local authorities step in when the Government fail the most fundamental maxim: that a society is judged by how it treats its most vulnerable. However, those resources should be going on early intervention programmes, youth centres, community centres, libraries—facilities that give people the means to realise their creative capacities and live full and independent lives. Instead, local authorities, alongside a network of food banks and community and volunteer groups, are forced to act like a sticking plaster over the worst effects of Tory austerity.

Of course, the impact cannot be explained by figures alone. The stories of ruined lives that I hear at my advice surgeries and deal with through my office every day collectively amount to a national tragedy. Current trends of growing overspends and dwindling reserves are unsustainable, and the Local Government Association has raised concerns that there remains no clarity on how local government will be funded after the four-year funding deal runs out in March 2020.

We know that all this is down to political choices, not economic necessity. The Conservative Government chose to give tax handouts to the super rich, corporations and bankers, and it was paid for by the rest of us. In the autumn statement, they chose to hand almost £5 billion to the biggest banks by cutting the bank levy—money that could have been used to fund our children’s services. A recent report by the Equality Trust found that, in the UK, the 1,000 richest people now have more wealth than the poorest 40% of households put together, their wealth having increased by a staggering £82.5 billion last year. Meanwhile, UK workers have not had a pay rise for 10 years and continue to suffer real-terms pay cuts.

It was never about tightening our belts. We were never all in it together. It is time to call austerity what it is—and it ends the day the Labour party takes office.

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I thank my hon. Friend the Member for Weaver Vale (Mike Amesbury) for bringing this extremely important debate to the Chamber. I echo my hon. Friend the Member for Liverpool, Walton (Dan Carden) on the lack of representation from Conservative Members. I hope that is symbolic of how they will do at the local elections.

I have seen Durham County Council staff work extremely hard in a punishing fiscal environment. Along with other Members, I have seen the systematic decimation of our local authorities. I put on the record my sincere thanks to every single council worker and every single Labour councillor. They work extremely hard in these terrible circumstances.

Each time there are further cuts, we wonder if it will be the last year. What else could those who oversee budgets possibly do to cut more money because of repeated Government demands? What more could local authority workers possibly do, with the workload that is piled upon them? Durham County Council has seen its funding cut by half since 2011. It has to make savings of £43.7 million over the next four years, on top of the Government-inflicted cuts of £209 million since 2011-12, with £15.3 million cut this year alone. That is simply unjustifiable. Local governments across the country are at breaking point.

Millions of pounds cut from spreadsheets means very little, in numerical terms. Everyone here knows the figures. What we know, more than all the numbers, is the devastating impact on our communities. It is the stretch and the strain on child protection services and social services. It is the community centres, which are so cherished by local communities, that have closed. It is the reduced library hours or the closing of libraries. It is swimming pool prices increasing as subsidies dwindle, pricing out the poorest people from being able to go to a local swimming pool. It is the reduction of drug and alcohol services. It is the threadbare social care services. It is the thousands of civil servants and council workers who lose their jobs.

The feel of our communities becomes impoverished. The help that people need, and the way in which people can enjoy their communities, has been stripped bare because the Government do not believe in local government. They wish local government to be vessel entities for privatisation, rather than democratically controlled mechanisms for public ownership.

Let us be under no illusion: cutting the millions of pounds from local government was ideologically driven, with little or no care for the devastating impact it would have on our communities. The Government have stripped bare our local government services. We know how convenient it is for the national Government to devolve cuts to local government when they are Labour-run authorities, because the Government can devolve the blame. I would love the upcoming local elections to be a referendum on the way the Government have treated our local communities. The idea that raising council tax rates, which residents quite rightly dread because they feel the strain on their wages, or business rates retention are some kind of miracle remedy for the years of this punishing Government regime is an absolute joke.

I would love the Minister to come to North West Durham and justify that strategy—to say to my constituents’ faces that this is a serious remedy for the millions of pounds stolen from my area and my council. Councils have faced these funding cuts for nearly a decade now, and for what? What has been achieved? The poorest areas have been hit the hardest and, as always, those who rely on public services the most—those who graft so hard and who are so passionate about their communities —are being punished by the Government.

I wonder how the Government will possibly justify this damning record in our local communities. That will be really difficult. I urge the public to demand so much more from their Government. It is only what they deserve.

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I thank my hon. Friend the Member for Weaver Vale (Mike Amesbury) for securing this vital debate. Local authorities across the country are at a tipping point. Eight years of Tory austerity have decimated our local councils, with my local authority of Wigan facing an additional 30% cut to its budget, which will mean £160 million taken out of its budget by 2020.

Prior to coming to the House, I was a local councillor. I saw at first hand the impact of the cuts inflicted to services, particularly on the most vulnerable. It is really important to note that cuts to local authorities are not just cuts to their services—the cuts to support services are just as barbaric. For example, in my area there has been a 20% rise in domestic violence, which is little wonder when local registered charities also lose their funding due to the financial pressures on local authorities via commissioning streams. The same can be said for homelessness, in which we have seen a huge surge nationally. Local cuts to early intervention and prevention grants have only exacerbated the problem. I urge the Minister to take that into consideration when she next thinks about the causes of homelessness.

Councils should have the resources to provide emergency accommodation and council housing to those most in need and to offer the support to transform people’s lives. However, the Government have time and again shifted the responsibility on to local authorities while dramatically cutting their budgets. Quite simply, our local councils are unable to cope any further with the increased responsibility placed on them by central Government without the means to deliver.

Without the resources to deliver, where do councils turn? As my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy) mentioned, they turn to their reserves. However, reserves are not pots of money that councils sit on for fun, as they are often characterised by the Government. Local authorities rely on these reserves to transform their services, as has been the case in my local authority. They are also called on in emergencies to ensure that councils remain operational.

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My hon. Friend is absolutely right about reserves. In 2007, Hull was hit by terrible flooding, which caused a lot of damage. One thing reserves are used for is for emergencies like that—to deal with unforeseen disasters. What will happen if we have a similar flood situation again and the council has spent all its reserves?

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I completely agree. We could all mention many instances where the reserves have come into play.

The scale of cuts faced by councils has meant that many have been forced to eat into the reserves to provide the everyday essential services that we all rely on. That is not only unsustainable, but reckless—we cannot play Catch-22 with the fate of our vital local councils. Doing so has led to the frankly astonishing reality of the National Audit Office warning that 10% of councils will exhaust their reserves within three years.

For me, there is another elephant in the room: Brexit. As the Brexit process continues, local authorities are still unaware of the impact that leaving the EU will have on their finances—business rates retention, for example. They also have to deal with the loss of EU structural funding: both areas on which the Government have not given sufficient assurances.

Our councils face the greatest crisis in living memory: an assault on their funding while also adopting ever more responsibility. Put simply, they have been passed the buck without the bucks. The Government’s unsustainable position must come to an end. If they are serious about delivering on housing, about social mobility and about giving powers to local communities, they need to provide the funding that our councils deserve.

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It is a pleasure to serve under your chairmanship, Mr Evans. I congratulate my hon. Friend the Member for Weaver Vale (Mike Amesbury) on securing this absolutely crucial debate today. I thank the many Labour Members who have contributed, particularly those who made speeches: my hon. Friends the Members for Peterborough (Fiona Onasanya), for Kingston upon Hull West and Hessle (Emma Hardy), for Liverpool, Walton (Dan Carden), for North West Durham (Laura Pidcock) and for Leigh (Jo Platt). They speak up on behalf of their communities, who are really struggling in the face of eight years of Tory austerity.

I find it bitterly surprising that there is not a single member of the parliamentary Conservative party here, save for the Minister and her Parliamentary Private Secretary. I cannot believe that after eight years of cuts and the destruction and decimation of our public services, there is not a single member of the Conservative party willing to stand up for their communities and to say to the Minister and the Government, “Enough is enough!”

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I have already spoken about the cuts facing the East Riding of Yorkshire Council. My constituency represents a very small part of that council, but the Conservative Members of Parliament that represent the council, such as the hon. Member for Beverley and Holderness (Graham Stuart), are not here. Why is it left to Labour MPs to give the Government the message about what is happening in their own Conservative-controlled councils?

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I agree wholeheartedly with my hon. Friend. As I said, I find it bitterly surprising. When we talk to Conservative Members in private, they are as concerned about what is going on in their own communities as Labour Members are. When we look at what is happening across local government, it is not just the Opposition raising concerns.

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I was a councillor for 10 years in a local authority in the north of England and I totally agree with the hon. Gentleman. It is time for everybody to speak up against the cruel cuts that completely demolish local authorities. People say, “The Lib Dems were also involved in this in the coalition years.” We need to take responsibility and say, “Yes, there was a point when we agreed to that, but enough is enough.” We have to stand up and say it is no longer acceptable. Our local services are no longer any services to speak of and everybody suffers.

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I am grateful to the hon. Lady. I will be kind to her because she was my son’s German teacher at Audenshaw School. She is right to acknowledge the role that the Liberal Democrats played in this matter. I know she was not a Member of this House when the cuts were made, but some of the most damaging and deepest cuts made to local government happened under the coalition Government. Not a single Liberal Democrat Member of Parliament stood up, spoke out and voted against those cuts, so I am afraid the Liberal Democrats do have a responsibility for the state that local government is in today.

However, the hon. Lady is absolutely right to say that enough is enough. Local government is in crisis—and it is not the Labour party saying that, but the National Audit Office and the Tory-controlled Local Government Association.

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In my constituency, Peterborough is run by a Conservative council, which has come to me and said, “Will you join us and lobby Government and say enough is enough? Stand up for Peterborough. We do not have enough funds. We cannot continue to do more with less.” Does my hon. Friend agree that the Government need to listen to their own voices from within and stop the cuts?

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I absolutely agree. The Tory-controlled Local Government Association and Tory-controlled County Councils Network speak with one voice in the local government family, which is that local government is on its knees, our public services are struggling and local government cannot carry on if the cuts continue over the coming years. We know what is happening because it is happening today. Tory-controlled Surrey County Council, in one of the richest parts of the country, is complaining that it does not have enough money. If Surrey County Council has not got enough money, what hope have the Liverpools, the Tamesides and the Hulls of this world?

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I am delighted my hon. Friend has made that point. We are trying to argue that this matter is not economic, but political. When Liverpool has 60% of its properties in band A, what hope have we got of raising council tax to pay for all our services?

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My hon. Friend makes a very important point. One of the two local authorities that I represent, Tameside Metropolitan Borough Council in Greater Manchester, has a £16 million social care funding gap this year. A 1% increase on the council tax brings in about £700,000. The Tamesides of this world will never be able to fill the gap in the cuts from central Government, so the point my hon. Friend makes is absolutely crucial. The authorities that we represent are grant-dependent for a reason, because no amount of business rates retention and increases in local taxation through the council tax within the referendum framework will ever make up the difference between the cuts that have been made centrally.

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My hon. Friend makes a powerful point. The situation is similar in my own local authority of Nottingham City where the amount required for adult social care in the year ahead is £12 million, and the social care precept raises around £3 million. Does he think that the Minister expects us to provide each elderly or disabled person with just a quarter of the care that they need, or should we simply pick a quarter of them and show that they have the care, leaving the other three quarters without the care that they require? What does he think the Minister’s advice would be?

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I will let the Minister speak for herself. We know that local authorities have to provide social care and that it is not the social care services that necessarily get squeezed, but all the other services that many of our residents access on a day-to-day basis. Most of our constituents do not access adult social care unless they have an elderly relative who needs it and they do not access children’s social care unless they have a child in the system, but they expect their parks to be well maintained, their streets to be adequately surfaced, street lighting to be fixed, and litter to be picked up. They expect basic decent services, and it is those services that are being cut.

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Exactly. There are cuts to the local library service, for example. Local libraries have had to reduce their opening times, and yet the move towards universal credit means that everybody is expected to apply online. They were told, “Go to your library and use the computers there,” but there are not enough computers in the local library and it is not open as much as it used to be. That is another consequence of the cuts and it shows a lack of joined-up thinking, a lack of forward planning and a lack of consideration and regard for the people in the poorer parts of this country.

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Absolutely. Those are the pressures facing our communities. We talk about local services as though they are isolated from one another, but they are the life blood of many towns, villages and communities. Library services, welfare support and advice, and housing services are crucial elements of what makes communities tick and brings them together.

I speak not only in my role as shadow Secretary of State for Housing, Communities and Local Government but as someone with a fundamental belief in local government’s power to make a difference. I spent 12 mainly happy years, and my wife is nearing her 18th year, as a Tameside councillor. I want to add to the thanks that my hon. Friend the Member for Weaver Vale expressed in his speech. We do not thank nearly often enough those, of all political parties and none, who serve as councillors and elected Mayors, or the staff and officers who implement councillors’ decisions. I offer thanks and appreciation to all those who work in our communities as elected members and local authority staff and officers. They are on the frontline of defending public services. Not only that, but they are the last line of defence when it comes to making the tough decisions that the Government have forced on them. I recognise the way many of them value and take pride in their position as councillors.

The National Audit Office’s assessment of the Ministry of Housing, Communities and Local Government makes for rather uncomfortable reading. Fundamental to the argument presented by the NAO is the failure of the Ministry to present a long-term strategy for the sector. As a result, even the four-year settlement that we were told was intended to offer some financial stability just kicked the can down the road. Authorities face major funding uncertainties beyond 2019-20.

Even within those four years of supposed certainty, local government has had to deal with rapidly shifting priorities from central Government—often announced at relatively short notice. It is reported by the NAO that the majority of case study authorities with social care responsibilities that it spoke to said that central Government funding outside the settlement had changed a number of times. An example was the new homes bonus being repurposed to fund adult social care.

We are told that

“The Department’s view is that these changes reflect considered responses to new pressures and risks”.

Anyone who has been following the issue would know that those pressures and risks have been growing since the beginning of the decade. As will ring true for many of my hon. Friends who have spoken today, over the decade from 2010 to 2020 Tameside will have lost close to £200 million in funding. Stockport will have lost well over £100 million. We can, as I have said, never fill those gaps with council tax alone. Although Stockport has a slightly better and more advantageous council tax base than the Tameside part of my constituency, this year it will have to find a further £18 million of savings—or cuts, as I like to call them—which is leading to consultation of residents about some drastic changes to the delivery of social care.

Tameside has said that demand for its services is at unprecedented levels. That is because of the wider impact of austerity on the public purse. If we operate in silos, there should be no surprise when cost-shunting presents itself as a problem on the town hall doorstep. Whether it is the closure of Sure Start centres, early intervention and family support, or the reduction in the number of domestic violence officers who used to be employed by the police, resulting in children being presented as safeguarding cases to the local authority, everything moves one way—from one part of the public sector to another. It may be councils pushing on to the NHS or police pushing on to councils, but it is a merry-go-round of self-defeating prophecy. We must stop that, and fund services properly.

Elsewhere in the report, we were told that the Government are working towards implementing the fair funding review. However, the implications of that are not yet clear. I must be honest with the Minister: anything that comes from a Minister’s mouth and that includes the words “fair”, “funding” and “local government settlement” sends shivers down my spine. We sure know what that means: that the Tamesides, Stockports, Liverpools, Durhams, Leighs, Wigans and Hulls—I could rattle through all the areas—will almost certainly end up with less money. As sure as night follows day, that is what happens when the Tory Government instigate funding changes to local government. Yet we have real social need, and are not able to raise money directly. What we see is the culmination of a crisis facing local government across England. What certainty can the Minister give our councils that they will get a fair funding settlement reflecting the areas’ needs and their inability to make up funding gaps through other sources? So far that has been badly lacking.

I want to end by discussing today’s crisis. Tory Northamptonshire is the first council effectively to declare bankruptcy, but it will almost certainly not be the last. The NAO reckons that in the next few years, unless the funding settlement improves considerably, one in 10 councils with social care responsibilities will have exhausted their reserves and, almost certainly, be in a similar predicament.

How did Northamptonshire, which by any standard is a wealthy part of the country, with a good council tax base, end up with an overspend at this year end of about £21 million, and reserves depleted to about £17 million? I will tell the House how it happened: it took the advice of the former Secretary of State, Sir Eric Pickles, who said that rather than complaining about cuts councils should spend their reserves. Once reserves are spent the money is gone; once the assets are sold, the asset base is gone. Once the money is gone, councils have to make cuts and take difficult decisions.

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Does my hon. Friend agree that the situation is a clear case of knowing the price of everything and the value of nothing?

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It absolutely is, but if it was compounded by Tory mismanagement at local level in Northamptonshire, the root cause of the problem undoubtedly came from the Tory Government. They have, as we heard from my hon. Friend the Member for Weaver Vale and the National Audit Office, presided over cuts of almost 50% in central Government funding to councils. That is unsustainable. If we want councils and councillors to facilitate services of such a quality as to provide dignity to the elderly and the best start for the young, and to provide the general population with quality public services, that must be funded.

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We have talked a lot about percentages and money, but I want to mention something a little more individual: the incredible increase in the number of looked-after children in my constituency, which has gone up by 140. We have one of the highest numbers in the country, and that is a consequence of the cuts. That is what happens when cuts take place.

Councils do not have the money for early intervention or the other services that used to provide that extra family support. Such support does not exist anymore, because all that is left is the statutory service. Sure Start used to be available for wider family participation; groups that anybody could take their child to are now open only to a small number of people who have a particular identified need. That all contributes to the increasing number of looked-after children. We cannot just sit here and ignore it: 140 children’s lives have been changed forever.

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My hon. Friend is absolutely right. Indeed, it is worse than that because we need to rebuild these services, yet over the past eight years we have lost thousands of dedicated council workers and staff. We have lost the corporate knowledge and history that was embedded in our local authorities. This is not just a question of money; it is difficult to rebuild overnight that capacity in our local councils.

The reality of Government cuts is laid bare in the National Audit Office report. Planning and development has been cut by 52.8%. If we are to meet the Government’s targets for new homes, who will be the strategic planners of the future to identify the land? Who will be the planning officers who implement planning applications? Who will be the planning enforcement officers and ensure that homes and buildings are built in accordance with the plans? Transport funding has been cut by 37.1%. These are our bus routes and the vital links between communities; these are our roads, pavements and cycleways. These cuts are unsustainable.

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The Government talk the good talk on social mobility and say how important that is, but at the moment there are young apprentices who live in rural areas and cannot afford to do an apprenticeship or attend college, or they cannot get there because there are no local transport services for them to use.

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Absolutely. This is about our museums, heritage, and cultural services—the glue that makes our communities tick. It is about who we are and that sense of place, yet funding has been cut by 34.9%. Housing services are not just about ensuring that people have roofs over their head. They are about support for the homeless and ensuring that our housing market works correctly. They are about tackling the scourge of rough sleeping, yet funding has been cut by 45.6%.

When a Government have created a £5.8 billion gap in local government funding, when everyone is saying that social care is on its knees, and when children’s services need an additional £2 billion, this Secretary of State, this Minister and this Tory Government stick their heads in the sand. They fail to give our services the money they need, and they ignore the crisis that is happening on their watch to our services and communities. We need a Government who are committed to our local councils and to rebuilding our communities. We need a Labour Government for the many, not the few.

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It is a pleasure to serve under your chairmanship, Mr Evans—for the first time, I believe. I congratulate the hon. Member for Weaver Vale (Mike Amesbury) on securing the debate. For the record, I am married to a councillor, and I employ a councillor.

This is an important issue that the Government take seriously, and we recognise the hard work of our councillors, councils and council staff. The report sets out the National Audit Office’s view on the financial sustainability of the sector. I wish to take this opportunity to set out what the Government are doing to support local authorities and to design a fairer and more transparent system of funding that gives them more control over the money they raise. Every day, local authorities deliver vital services to the communities they serve. Like the rest of the public sector, they have had their part to play in helping to bring down the deficit. It is to their credit that they have continued to provide high-quality services, while delivering a better deal for the taxpayer. Indeed, so good are they that non-ring-fenced reserves have increased by 47% since 2011, to £21 billion in March 2017.

We take the funding of local government very seriously. That is demonstrated by the package of measures that we provide to local government as part of the 2018-19 finance settlement, which Parliament approved last month. The settlement confirmed a real-terms increase in resources for local government over the next two years, from £44.3 billion in 2017-18 to £45.6 billion in 2019-20. That is the third of a four-year deal, and it has reinforced our commitment to delivering more freedom and fairness, and greater certainty to plan and secure value for money. The deal has given English councils access to more than £200 billion of funding in the five years to 2020.

We recognise that pressures are growing, particularly in the light of higher than expected inflation—I was delighted, however, to hear today’s announcement that inflation is down to 2.75%—and pressures on services such as adult and children’s social care. That is why in the settlement we sought to strike a balance between addressing the pressures on services and the burden placed on taxpayers, by increasing the core council tax referendum principle by 1% to 3% for authorities in 2018-19.

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But that is not a single penny extra from central Government. All the Minister has done is shift the burden from central Government on to local taxpayers. As I explained, a 1% increase in Tameside brings in £700,000. It is not enough, is it?

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I thank the hon. Gentleman for that intervention and repeat: the money from this Government has increased from £44.3 billion in 2017-18 to £45.6 billion in 2019-20. The National Audit Office rightly noted that local authorities are increasing their spending on the social care services that councils provide to our elderly and vulnerable citizens, in the face of growing demand. This is why at the spring Budget in 2017 an additional £2 billion was announced for adult social care. This year we have seen how that money has enabled councils to increase provider fees, provide for more care packages and reduce delayed transfers of care.

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That still equates to a 3% reduction from 2010 to 2017. It is a real-terms reduction.

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I am always delighted to hear the dexterity of mathematicians in this building. It is £44 billion up to £45 billion, which I see as an increase. [Interruption.] I will move on. Local government and the NHS have worked in collaboration this year to deliver significant improvements in care. That is highlighted by the 26% reduction in delayed transfers of care, when comparing February this year with February last year. That is not all, however, because a further £150 million is being made available in 2018-19 for adult social care support grants. That, alongside the freedom to raise more money more quickly through the use of the adult social care precept, and the improved better care programme, means that councils have access to £9.4 billion in dedicated adult social care funding over the three years from 2017-18 to 2019-20.

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Listening to the figures being presented, I understand the proposition that there has been an increase in funding. However, as Labour Members have said in their contributions, in real terms this is not an increase because supply is not keeping up with demand. I feel that this is like the emperor’s new clothes—the emperor seeks to describe the elegant, flamboyant gown that he is wearing, but actually he is completely naked. The amounts that the Minister is talking about do not keep up with the demand. These are demand-led services, and that is the point we are seeking to make.

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The hon. Lady makes her point very elegantly, but I prefer the dress she is wearing today to ones I might imagine.

Alongside the £150 million for adult social care support grants, there is the freedom to access £9.4 billion up to 2019-20. I make it absolutely clear that real improvements are being made in adult social care services. That is in relation to the delayed transfers that have happened and the change whereby the NHS is working so much better by working hand in hand with local government. There has been such an improvement.

Like the NAO, we recognise the importance of investment in prevention and in high-quality children’s services. That is why the Government have invested almost £250 million since 2014 to help the children’s social care sector to innovate and redesign service delivery to achieve higher quality and better value for money. We have also invested £920 million in the troubled families programme, reducing the number of children in need.

I would like to say something about our work to deliver a fairer funding settlement for local government—I do appreciate the comments from the hon. Member for Denton and Reddish (Andrew Gwynne) on this matter. We all know that we live in a changing world. Over the years, the current formula for budget allocations has served councils well, but what is right today might not be right tomorrow. The conditions that councils face, including demographic shifts in some parts of the country and new risks, mean that the system of financing local government also needs to change. We need an updated and more responsive way of distributing funding that gives councils the ability to meet the challenges of the future. That is why we are currently working with councils to undertake a review of local authorities’ needs and resources. There have been widespread calls for a thorough review, and we will deliver that.

We are committed to using the most up-to-date data available and, as far as possible, taking an evidence-based approach to both current and future demand. What we are looking to do is very important. We want to devise a new funding system that more fairly reflects modern needs. The Government aim to implement a new system, based on their findings, in 2020-21. Alongside the new methodology, in 2020-21 the Government are committed to giving local authorities greater control over the money they raise.

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Will the Minister ensure that no council gets less money as a consequence of the new funding formula that she is proposing?

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Much as I would love to do that, I think the safest thing I can do is refer the hon. Lady to the new funding for schools. Every single school has not had a reduction under the new fairer funding; every single school has had an increase of at least 1%.

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rose

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Will the Minister give way?

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No, I am going to carry on. As I said, alongside the new methodology, the Government are committed to giving local authorities greater control over the money they raise, which we are doing through our plans for increasing business rates retention. Local authorities are the engines of local growth. They know best the levers to pull to boost their business rates, which is why business rates retention is an important move. Our aim is for local authorities to retain 75% of business rates from 2020-21, with the other 25% going to councils that do not have a large business rates take.

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On that point, if I am not able to make the point that I was going to make previously, I want to ask this: will the system make allowances for councils such as Hull? Currently, 81% of its income comes from the Government revenue grant and only 19% can be raised locally.

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Yes, indeed. Forgive me for repeating myself, Mr Evans: 25% will go to the councils that do not have large business rates retention.

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The Minister says 25%. Hull City Council currently relies on the Government revenue grant for 81% of its income, not 75%.

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The business rates for the City of London are many, many millions of pounds. The money that is split out goes to the rest of the country.

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Of course, this is not just about the councils that are unable to raise enough business rates to support their services now. Will adequate funding mechanisms be in place to ensure that if a large employer were to close and leave a council that is currently sustainable in terms of business rates, it would in effect get the shortfall created by the employer moving out or closing down?

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I would be devastated if that happened and I cannot imagine why it would happen, with the growing economy that we have.

We will continue to work with the sector to identify opportunities to increase the level of business rates retention further at the right time. We are already making progress towards that. The Government have announced an expansion of the piloting programme for business rates retention into 2018-19. In the latest round of pilot bids, more than 200 authorities put themselves forward, demonstrating local government’s enthusiasm for business rates retention. We are enthusiastic about working with them to take that agenda forward. We will be taking forward 10 new pilots, covering 89 authorities, instead of the five that we originally planned. A further pilot will begin in London in 2018-19, and existing devolution pilots will continue in 2018-19. The 10 that we have selected, taken alongside the existing pilots, give a broad geographic spread.

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At what stage will the Government legislate, as they previously stated they would, to ensure that there is 100% business rates retention? And surely, as part of the funding mix, an area based grant needs to be retained.

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I am afraid that the hon. Gentleman will have to wait for that to happen.

I referred to a broad geographic spread. That was carefully thought through, as we want to see exactly how the system works across the country, and the pilots will ensure that that happens. The expansion of the pilots, and our plan to do more piloting in 2019-20, is how the Government are listening to the voice of local councils. The precise benefit to the areas involved will depend on the economic growth that they achieve. I am very keen to see what we can learn from these and the other pilots. We should be clear: the system of business rates retention is helping local authorities to benefit from the proceeds of growth.

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Does the Minister agree with us that, actually, a fair funding formula is about the requirements of the citizens who live in the area, and that that has to be the responsibility of not just local government, but national Government? I invite the Minister to come to Liverpool to see what would be the consequences of any business rates changes before they take place.

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I thank the hon. Gentleman for that kind invitation; I am sure that eventually that will happen. Thanks to the business rates retention scheme, local authorities have had approximately an additional £1.3 billion of funding to support local services in 2017-18. That is over and above their core settlement funding.

Investment is important, but it is also vital that local government continues its work to deliver better value for money. Local government has a strong track record on efficiency, setting an example to other parts of the public sector. My right hon. Friend the Secretary of State and the Under-Secretary of State, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), who is responsible for local government, are keen to continue to work with the sector to increase transparency and share best practice and to harness the power of digital to transform services.

I am glad that we have had this chance to discuss the National Audit Office report. It is good that the NAO has recognised the positive work of the Department in getting to grips with the challenges across local government. I believe that the Government have shown that we are alive to the challenges that the sector faces and have a coherent plan for reform.

I thank the hon. Member for Weaver Vale for calling a debate on this important issue. I look forward to working closely with many colleagues over the coming months and discussing some of the challenges and opportunities facing the local government sector, and I look forward to hearing the hon. Member for Weaver Vale winding up the debate now.

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I thank you, Mr Evans, and the Minister. Of course, I too am disappointed at the austerity clearly displayed on the Government Benches—that symbolises the Government’s relationship these days with local government.

It is clear that we are at a watershed moment. The National Audit Office paints a stark picture, highlighting the genuine risk to statutory services. It is clearly time to change the record. Austerity is not working. It is a political choice. Certainly, as my hon. Friends have pointed out, it is not a sound financial one. Councils are crying out for certainty and are desperate to fund vital services and create better, healthier, more prosperous communities for all. We are a wealthy nation and must get our spending priorities in order. Rather than giving the richest corporations and individuals billions of pounds in tax cuts, let us fund local government services and help the most vulnerable to thrive and reach their full potential. We demand and need fair funding for all, now.

Question put and agreed to.

Resolved,

That this House has considered the National Audit Office report on the financial sustainability of local authorities, HC 834.

Sitting suspended.