[Mr Philip Hollobone in the Chair]
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I beg to move,
That this House has considered the adequacy of funding for local authorities during the covid-19 outbreak.
It is a pleasure to serve under your chairmanship, Mr Hollobone. One day, there will be a public inquiry into the conduct of the Government during this pandemic and the decisions they have taken, particularly on the provision of finance to different parts of the country, and we will be able to learn what went well and what did not over the past few months. I hope that we will all support such an inquiry, so that further errors are not made in future.
Even before the pandemic, it would have been hard to argue that national Government were friends of local government and local services. Since the 2010 general election, the Government have reduced funding for local authorities by some £15 billion. The National Audit Office has found that Government funding for local authorities has fallen by 49% in real terms from 2010-11 to 2017-18, and that this equates to a 28.6% real-terms reduction. To put that in context, councils have lost 60p out of every pound they had a decade ago. The Institute for Fiscal Studies concurs, saying that local government spending has “fallen significantly”.
Let us never forget that this is not by accident: it was a decision made by Conservative Ministers and their Liberal Democrat coalition partners in the 2010-15 Government. National Government grants were gradually scaled back, so that poorer areas with great need were not provided with the additional funding they needed alongside local income generation. The cuts made in the name of austerity did not fall equally on the shoulders of people and local authorities: they hurt the poorest and most disadvantaged areas significantly, including areas such as Tower Hamlets, where my constituency is. The IFS says that deprived communities—those communities most reliant on public services—such as those in my constituency saw the greatest reduction in national Government funding.
There is another unfairness to the way in which funding was allocated, particularly Government grants, which have pretty much disappeared. That has made it very difficult for local authorities to deal with child poverty. Unfortunately, my borough, which includes two constituencies—Poplar and Limehouse and Bethnal Green and Bow—has the highest child poverty rate in the country. It is vital that the allocation of funding is fair and addresses the actual needs of communities. According to the Local Government Association, between March and June this year, councils have faced a bill of £4.8 billion because of extra costs and lower incomes due to the coronavirus pandemic. It estimates that the cost of the increased pressures on adult social care alone will be £533 million, and that the figure for public health will be £148 million. Future non-tax income losses due to covid will be about £634 million.
In summary, in terms of funding, the coronavirus pandemic has added even greater challenges to already pressurised local authorities up and down the country. And, of course, the worst challenges have been in poorer areas. I know that many other Members will want to speak of how their own councils have struggled with all those challenges while having to provide much-needed services during the pandemic.
In addition, local authorities have had to rise to the challenge of making up for the fact that the Test and Trace system has been inadequate. It is funded by the £12 billion provided to Serco and other private contractors, but local authorities have had to step in to serve their communities and make it work. They are taking on additional responsibilities because of the pandemic but not getting the necessary funding. The Government promised to provide that funding and it is falling short.
Although I welcome the £3.2 billion of emergency funding and the £300 million of funding for clinical commissioning groups, that still leaves a shortfall of billions of pounds, which is putting local authorities between a rock and a hard place. Labour, Lib Dem and even Conservative-run councils are struggling to balance the books. Some are going bankrupt or have declared bankruptcy. That is a big worry for communities, given that local authorities are on the frontline, cleaning the streets, looking after those who are vulnerable, dealing with the pandemic and providing support, including to the police service, which has experienced cuts, with 20,000 officers taken out of the system over the last decade. In reality, this means that communities such as mine in Tower Hamlets have faced £200 million of cuts over the last 10 years.
The extra costs of covid mean that a further £30 million will have to be found; otherwise services will have to undergo dramatic changes, which will have a damaging effect on people by 2024. At the same time, demand for services has grown. At the height of covid, my area also experienced the fourth highest age-standardised death rate in the country. The health inequalities and other factors that make people vulnerable mean that our local authority has to work closely with other agencies and their resources to protect people. Their actions have saved lives. There would have been an even greater number of deaths if local authorities and partners had not done that work, but they cannot continue to do it without support from national Government.
On education, schools are suffering and need support. Local authorities have worked closely with them to provide that support, but they need funding, as we saw in this summer’s debates about holiday hunger and child poverty. My local authority stepped in a long time ago to help keep children fed, but the food bank queues are astonishing. I would welcome the Minister visiting some of the food banks in my constituency. I joined others in visiting Bow food bank recently. The number of people using it has increased dramatically. They are not the usual suspects who need help because they are extremely vulnerable; middle-income families are also struggling because of covid, employment issues and lack of support. The need is greater, but the funding and resources are not there.
Other services under threat—and not just in my constituency but up and down the country—include those for young people with special educational needs and disabilities and those for young vulnerable children. It cannot be right that, in addition to the double whammy of the coronavirus pandemic and long-term funding cuts, the future life chances of the most vulnerable are being further damaged. We need the Government to act and use tomorrow’s spending review announcement to make sure that local authorities get the support they need to protect our communities.
I am sure that the Minister will say that there are limited resources. Of course there are, but the question is how the money is being used. We have to ask this. Is it right that, for instance, the towns fund—the NAO and others have pointed this out—which is more than £3 billion, is allocated in the way it has been rather than by focusing on indicators of need? That cannot be right. That kind of favouritism is what breeds distrust. It smacks of pork barrel politics and is absolutely unacceptable. How money is allocated and spent is crucial. Of course, there have also been scandals about personal protective equipment and other scandals.
It is right to say that the Government need to refocus their resources in a way that is fair and appropriate, because many local authorities and not just mine—Sunderland, Knowsley, Sheffield, Gateshead, South Tyneside, Oldham and many others—desperately need additional funding but are not getting it. I could go on, and I am sure other hon. Members will, about the number of local authorities that need support but are not getting it.
We need the Government to think quickly and act quickly to ensure that local authorities get the support that they need. If they do not, we will face, in the middle of a second wave of coronavirus—in the middle of a crisis like no other—more lives being put at risk not only by of the pandemic but by the failure to address the secondary effects of extreme vulnerability through local action and support, because local authorities will not have the capacity and resources to act.
I hope that the Minister will take on board my concerns and those of others about children and young people, adult social care and the wider issues of the underfunding and neglect of local government, which is at the frontline of delivering services and does not get the recognition and credit it deserves for the work it does. These are decent public servants who work very hard to deliver for our constituents. We need to back them up and support them, because if we are to fight and win the battle against the coronavirus pandemic, we are going to need them even more than ever before. We are also going to need a collaborative effort from the private and the public sphere to deliver implementation of the vaccine, as well as to improve testing and tracing, on top of all that they already do.
I hope that in today’s debate we can build consensus among Members of all parties to make the case for local government, because it is absolutely at the heart of addressing not only the challenges we face with the pandemic, but the long-term challenges of tackling inequality and genuinely fighting to level up. If the Government genuinely meant what they said in the election about levelling up, they need to put their money where their mouth is and deliver. I hope that the Minister will make that case later today to the Chancellor of the Exchequer, ahead of his statement.
The debate can last until 4 pm. I am obliged to start calling the Front Benchers no later than 3.37 pm. The guideline limits are 10 minutes for Her Majesty’s Opposition and 10 minutes for the Minister, and then Rushanara Ali will have two or three minutes to sum up the debate at the end. There is a stellar cast of Back-Bench talent. Sixteen Back Benchers are seeking to contribute until 3.37, so if we have a time limit of three minutes, everybody should be able to contribute.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank the hon. Member for Bethnal Green and Bow (Rushanara Ali) for bringing to the House the issue of the adequacy of local government funding during the covid outbreak, as it facilitates a much-needed debate on both the role of local governments in the crisis effort and the broader interaction between local and national Government.
It was important that any central Government approach to crisis management throughout the pandemic was measured against three key performance indicators. The objectives were, first, to provide adequate financial support to ensure that crucial local government services could continue; secondly, to equip local governments with the tools and flexibility they required to adapt their services to provide targeted support in the relevant jurisdictions; and, finally, that any such support did not create a precedent that would serve to create a further burden on an already overloaded state apparatus.
The figures as of 23 October, without taking into consideration the latest round of business grants, highlight that in my constituency alone, Wakefield Council received an extra £41.52 million to support its efforts in tackling covid-19. This ensured that critical services could continue, despite decreased tax revenues and the higher costs incurred by the pandemic.
In April, £850 million of social care grants, for both children and adults, were paid up front to cover the period from April to June 2020. Although the figures provided by central Government may not have been delivered on a like-for-like basis, they have provided unprecedented sums of money to local authorities, facilitating their ability to use discretion in targeting the needs of their districts as they see fit.
In a crisis, ring-fencing funds for one service may not be appropriate when jobs are at risk and the landlord needs his rent paid, for example. Decisions were made on the best information available at one point in time, and further support was provided where required. One such example was the £617 million discretionary fund, which served as an addendum to the small business rate relief grant and retail, leisure and hospitality grants, and allowed local authorities to distribute further moneys as they saw fit to businesses in need. At the time, I suggested that any underspend from the small business rate relief grant and RHL grants should be combined with the discretionary grant, as a method through which individuals who had been defined as the economically excluded could receive much-needed support on a case-by-case basis.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) for securing this debate. I want to begin by paying tribute to Wirral Council for the incredible support it has provided to my constituents during the pandemic. This includes instituting a greatly deserved pay rise for care workers, helping homeless people off the streets and into appropriate accommodation, co-ordinating mutual aid efforts and providing much-needed financial support to residents whose livelihoods have been devastated by the lockdown restrictions.
Despite all the difficulties that council workers have faced themselves, their commitment to the poorest and most vulnerable people in our community has always shone through. As a matter of local pride, I would argue that Wirral Council is exceptional, but I note that its efforts are being replicated nationwide and all hon. Members will have similar stories to share.
After years of being underfunded, marginalised and overlooked, local authorities have risen to meet the challenges of covid-19 admirably. This year has shown what a vital role councils play, not just in the provision of services, but as powerful advocates for those people whose voices are too rarely listened to by central Government.
I commend the resolve shown by the metro Mayors, Steve Rotheram and Andy Burnham, when the Government plunged their regions into a tier 3 lockdown with only cut-price financial support, and I was deeply moved by the testimony of the newly elected leader of Wirral Council, Jeanette Williamson, as she opposed the Government’s callous decision to let children go hungry over the holidays. I was also very glad to work so closely with council leaders from across Merseyside in successfully lobbying for the reopening of gyms and leisure centres before the current lockdown was announced.
But now our councils face an uncertain future. Across the country, the threat of cuts to frontline services and even bankruptcy looms. Expenditures have soared while income in the form of business rates, council tax and parking charges has plummeted. Wirral Council faces a black hole of £60 million in its budget, and it is not alone. Last week, the County Councils Network warned that 60% of its members anticipate having to make a fundamental reduction in frontline services, while just one fifth are confident that they can set a balanced budget next year. At a time of spiralling unemployment and a public health crisis unlike any known in our lifetime, we simply cannot afford further cuts to already overstretched and underfunded frontline services. The human cost would be unthinkable.
In March, the Secretary of State for Housing, Communities and Local Government promised that the Government would support councils in doing whatever it would take to protect their communities. Now it is time to honour that promise. The Government should listen to the Local Government Association and provide a minimum of an additional £8.7 billion in core funding over the next financial year. Councils in areas as diverse as Wirral, Nottingham and Gloucestershire have also called for the cancellation of debt held by the Public Works Loans Board. That would massively increase the spending power of local authorities and allow them to make critically important investments in housing, adult social care and green development.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I am grateful to the hon. Member for Bethnal Green and Bow (Rushanara Ali) for giving us the opportunity to pay tribute to council staff across the country.
The whole country has been knocked sideways by the pandemic, and frontline workers in all sectors and industries have stepped up in the most tremendous way, and that really does apply to councils and council workers. They have faced huge costs and huge reductions in their income because of the crisis, but the real effect is not financial. It is on the staff who deliver services for councils. I want to acknowledge that. When we were having the daily press conferences at 5 o’clock, the leader of Wiltshire Council, Philip Whitehead, said to me in despair one evening, “Can we please have the press conferences in the morning,” because all those announcements were coming out and his staff were having to work right through into the middle of the night to respond. That made me realise how hard council staff work, not only out in communities, but in council offices as well.
I want quickly to acknowledge the financial commitments that the Government have made to local authorities through the crisis: nearly £5 billion of non-ring-fenced money, specific grants for a range of special activities that councils have to perform, £6 billion in cash-flow facilities to help councils, and compensation for the loss of fees they have incurred. However, I acknowledge that councils are still out of pocket, and we need to think about how that gap will be met in the months and years to come.
In Wiltshire we have a prudent council that has balanced the books in recent years. It has received additional money from the Government—£15 million is due. That is still to be confirmed, but we trust that it will arrive. Also it has been possible to increase the council tax through the social care precept, which, again, is to be confirmed. We understand and hope that it will be allowed. The authority still faces a budget gap of nearly £30 million, and I recognise that it will be a long task to match and meet that. I hope more money can be found.
I want to finish with two more strategic solutions that all councils have to grapple with, and opportunities that they can take. The first is in reform of social care, which makes up the bulk of spending by local authorities—65% in the case of Wiltshire. I am not going to get into a debate on how to reform social care, but clearly our model is not working and we need to fix it and the financing of it. I support the call by the Health and Social Care Committee and the Housing, Communities and Local Government Committee in the last Parliament for a new model of social insurance to fund social care, which will enable us to get on top of costs.
Finally, I want to pay tribute to a Labour council, Wigan, which, over the last 10 years, has faced all the challenges of austerity, and coped with them by doing a deal with the community of Wigan—the people of Wigan. It kept frontline services open and cut its own back office. It kept the frontline services open by trusting communities and working properly in partnership. That is the model for all of us.
I want to begin by thanking all those on the frontline of the pandemic, working to care for the elderly and vulnerable, collect our refuse, look after our children, and much more. Our frontline local government staff are essential workers in every sense.
We all know that local government funding has been decimated since the coalition Government started a programme of cuts in 2010. Since then, we have been subject to a slash-and-burn austerity programme that has led to councils losing more than half their budget in the past decade. Overall, councils in England can spend £7.8 billion a year less on key services than they did in 2010. That is a cut of £150 million a week. Drastic cuts to local government funding have seen the UK’s most deprived areas shoulder the burden of austerity. Poor areas have faced a threefold impact. They have less money to start with, they have been hit hardest by the demands caused by austerity, and are the least able to meet the shortfall with council tax.
Covid-19 has added fuel to the fire. The financial pressures of meeting the costs of tackling covid include lost income from council tax and other revenues. The total is between £10 billion and £13 billion for councils. I would usually be quick to point out that more is being cut from poor Labour councils than wealthy Tory ones, but after 10 years of cuts and a lack of meaningful funding through the pandemic almost all councils are now at breaking point, including large Conservative-controlled councils.
Naturally, though, I want to talk about Leeds. Our situation is not unique. It represents the situation that many, if not most authorities, are facing, but still the figures create a grim picture. Following significant extra costs relating to covid-19, the council is currently projecting, after the application of Government support, an estimated funding gap of £52.5 million for this year. For the year after, 2021-22, the projected funding gap is £118 million. Leeds City Council may have to make more than £95 million of cuts in the coming months if no extra source of income is found.
Council staff are in the frontline in the battle against this disease. Bus drivers, social workers and public health officials are all vital to the proper functioning of cities—now more than ever. But at Leeds City Council jobs are being hit. The most recent figures put the projected job cuts at around 800 with the current funding gap. The council has done everything asked of it, including lending its chief executive officer to the Government to assist with track and trace and going door to door in areas talking with local communities.
Labour councils in this country have found new ways to help their citizens with the pressures they face. Labour councils make, and continue to make, a huge difference to people’s lives despite a Conservative Government whose policies have left gaping holes in their budgets. I would like to pay particular tribute to Leeds City Council administration, which has done great work in providing frontline services, including to black, Asian and minority ethnic and older people, who have been hit hardest by covid.
The Government must now honour their pledge, do whatever it takes and step up to help with Government underfunding in the future, including in tomorrow’s Chancellor’s statement, to help close fully the funding gap in Leeds of £118 million.
It is a pleasure to serve under your chairmanship, Mr Hollobone.
I start by thanking Suffolk County Council and East Suffolk Council for stepping up to the plate to meet the challenges posed by covid-19. I want to highlight the challenges that county councils face, taking into account my role chairing the county all-party parliamentary group. Councils have been on the frontline supporting communities during the pandemic. This has cost money, and the Government have met covid-related costs through four tranches of emergency funding. However, there is uncertainty about the potential costs of the current lockdown, which will not show on the latest local government returns to the Ministry of Housing, Communities and Local Government.
Covid-19 has starkly exposed the fault lines in the funding of county councils and will exacerbate the underlying financial challenges they face in areas such as adult and child social care, special educational needs, highways maintenance and school and bus transport. The County Councils Network’s budget survey of two weeks ago revealed that just one in five of their 35 council members was confident of delivering a balanced budget next year without dramatic reductions to services. In the following year, only one of those councils is confident of doing so.
In the immediate future, county councils are faced with an overbearing and seemingly insoluble dilemma. On the one hand, they will be expected to, and they will, play their role in the covid recovery. On the other hand, they will find that they have even less money to perform this vital task. Two thirds of the funding that county councils receive comes from council tax, and they will thus be exposed to the difficulties in collection that I fear will be inevitable.
The future is both bleak and intimidating for county councils. In the very short term, additional funds are urgently required both tomorrow and in the local government funding settlement that is due next month. Grants should be provided for three years, not one year, so that councils can plan strategically, and more money is needed for special educational needs. In the longer term, we must fix social care, and the Government must carry out the fair funding review.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I begin by thanking and paying tribute to my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) for securing this important debate.
Day in, day out, our local authorities are on the frontline fighting the virus and providing essential services that we all rely on, from bin collections, street cleaning and libraries to children’s services, social care and homelessness support. I pay tribute to all council workers, especially those at Barnsley Council. During the pandemic, we have relied on them to rapidly reorient themselves in a way we could never have envisaged: being on the frontline of the fight against the pandemic as well as supporting their businesses and residents, all while continuing their everyday essential work.
For that, they were promised “whatever it takes”; they should do whatever was needed, and the Government would ensure that they were not left out of pocket. Sadly, the rhetoric has not been matched by reality, certainly not in Barnsley. Our council has done an exceptional job of supporting residents, but that has come at an expected cost at the end of March of £50 million, including around £34 million in support for the most vulnerable and social care and relief to support businesses. The council also estimates around £16 million of lost income from council tax, business rates and fees. The Government income compensation scheme is expected to provide only £2 million to cover that, with that shortfall leaving the council with a loss of £15 million. The Institute for Fiscal Studies estimated the figure nationally at £1.1 billion, and that was before the second national lockdown.
Of course, this follows a decade of austerity in which Barnsley received the biggest cut in Government support of any council in the country. My constituency cannot afford to be left behind by this Government for another decade.
Thank you very much, Mr Hollobone. It is a pleasure to serve under your chairmanship, especially with such kind strictures on the time limits. I pay tribute to the hon. Member for Bethnal Green and Bow (Rushanara Ali) for securing the debate, and to all Members who have spoken so far, all of whom clearly care very much about their communities. This debate should be conducted in a cross-party spirit, and I am sure that the Minister will respond in those terms at the end.
These are extraordinary circumstances. There has actually been an extraordinary response from central Government in terms of the amount of money going to councils, but there has, more than ever, been some extraordinary leadership in local councils. I mean not only the leadership of the councils but the people carrying out their jobs, as my hon. Friend the Member for Devizes (Danny Kruger) mentioned. Everybody on the frontline has shown leadership in responding to the awful circumstances we are in.
To give the view from Staffordshire, Newcastle-under-Lyme Borough Council—a district council—and Staffordshire County Council told me that, by and large, they have had adequate funding from central Government to make up their covid-related losses. That funding has been timely, which they really praised. The Government acted quickly and allowed them to plan ahead, although I recognise what my hon. Friend says about those 5 pm press conferences, which definitely necessitated some late nights. It would be helpful if that was not repeated.
Simon Tagg, leader of Newcastle-under-Lyme Borough Council, says that the Government have listened and given funding to cover the shortfall across council budgets on homelessness, business support and leisure services. That is hugely welcome. Staffordshire County Council has had two leaders during this time, Councillor Philip Atkins and Councillor Alan White, both fine public servants. They estimate that, all in, they have received around £83 million this year in various grants from central Government. They reckon they will have an overall overspend of about £2 million, partly due to delayed cost savings, in addition to some lost income from council tax and business rates.
My councils of course have some asks of the Minister, and it would be remiss of me not to mention them. A lot are about collection fund losses. The Government have promised to bring forward proposals to share collection fund losses where councils will not get as much council tax and business rates in. I have been asked to ask the Minister to ensure that the Government will honour that promise and bring that forward as soon as possible, so that those councils can have some certainty in the year ahead. Newcastle-under-Lyme Borough Council would like more funding to cover the cost of council tax support for people claiming benefits. It expects a big increase in that bill when furlough finishes. Staffordshire County Council highlights long-term concerns around social care and the overall funding quantum for local government. It is essential that they have certainty, so that they can do all they can to help the economy get back on its feet and, of course, to level up.
North Staffordshire is one of the principal targets of levelling up in this country. We have had a lot of support from the Ministry of Housing, Communities and Local Government. I look forward to our future high streets fund announcement and our town deal bid, both of which are coming soon. Councils need certainty about their underlying funding; otherwise, they may be forced to make cuts to the universal services that many people rely on.
I again thank the hon. Member for Bethnal Green and Bow for securing this debate. I thank everybody in Staffordshire, including the leadership, the chief executives—Martin Hamilton and John Henderson—and everybody who has done their part to get us through this pandemic. I look forward to the Minister responding to my points.
At the start of the pandemic, the message from Government to local authorities was clear: “Do whatever it takes to deal with the coronavirus, and we will cover your losses.” Councils across the country have been at the forefront of the coronavirus response. They are facing growing costs and increasing demands, and they have seen significant drops in income. At the time when local services are needed more than ever, our councils are being left to pick up the pieces.
I want to express my gratitude for the support that Bath and North East Somerset Council has provided to services such as the Community Wellbeing Hub and food clubs and pantries. However, despite the initial promises, council funding from central Government has been drip-fed and inconsistent. That creates a high degree of uncertainty about the long-term financial impact on council finances, and it means uncertainty for the core services for our communities.
Bath and North East Somerset Council is one of the hardest-hit by the pandemic. Over the past 10 years, it has done exactly what the Conservative Government asked of local authorities and created its own income stream, but its main funding stream—heritage and parking services—has effectively dried up. In normal times, the Roman bath and other heritage services would generate millions of pounds. At the height of the lockdown, however, the council was losing £91,000 a day from heritage and parking services. The council estimates that it will need to find £29 million of savings over the next five years.
Prior to covid, councils were already facing a big funding gap. According to MHCLG’s financial information service, the financial challenge facing councils in 2020-21 is now £11 billion. The delay in the comprehensive spending review has only created more uncertainty as councils try to set their budgets for next year. When will the Government make good on their promise to cover councils’ financial losses? For example, up and down the country councils such as BANES have outsourced their leisure services to companies such as GLL, a not-for-profit charitable social enterprise, which is already closing leisure centres and will close more unless the Government step in. We all know how important sports and activities are for people, especially for their mental health and wellbeing during the corona crisis.
Local businesses that are renting premises from the council in Bath are also suffering. The council cannot afford to give them more rent relief because it needs every penny to cover the cost of essential services such as street cleaning. Local councils have kept their promises to local people. When will the Government deliver on their promises to councils?
It is a pleasure to serve under your chairmanship, Mr Hollobone. It is clear that the countries that went local early are the ones that have had the most positive feedback about the way they responded to covid. My two local authorities, Hillingdon Council and Harrow Council, are no exception to that: they have redeployed huge numbers of staff from roles as diverse as working in our libraries and the councils’ contact centres to tasks such as delivering meals on wheels to vulnerable residents and back-filling other staff to enable them to be released—for example, to set up and run emergency mortuaries to serve London. There is no question but that council staff are on the frontline of the response to covid.
We have to consider the question of financing and what it means for local authorities in the future. Before this year of covid, local authority budgeted expenditure in England stood at about £99.2 billion. Within that, the official returns from local authorities show reserves of just over £25 billion, of which £23.6 is non-ring-fenced. I dare say that colleagues over at the Department of Health and Social Care will be looking enviously at MHCLG, because whereas DHSC has to bail out NHS authorities every year for the work they do, MHCLG is in a situation that many businesses would frankly be enormously envious of.
The challenge, however, is that we uniquely require local authorities to balance their budgets in year. Unlike central Government, they are not able to borrow to finance revenue expenditure. They have to make sure that those budgets balance every year, so if there is excess expenditure, cuts need to be made. When we begin to drill down into the national financial position, we find that revenue balances to cover the additional costs are not necessarily found in the authorities that have the biggest financial challenges.
The point made by my hon. Friend the Member for Waveney (Peter Aldous) goes to the heart of the issue. Social care authorities face a lot of demand. Certain London boroughs and county councils have the largest number of vulnerable people to support, but a significant proportion of the balance is in other types of local authorities that do not face the same day-to-day costs. I add my voice to the pleas to the Minister that we need to look at how the funding in the system is distributed if we are to do this better. When we drill down even further and look at the response of individual local authorities, it becomes clear that the covid impact is very different from place to place. Around two thirds of the average council’s expenditure is on social care for adults and children, which concerns less than one in five of the population.
The response to covid has brought all manner of new and additional costs, the vast majority of which—according to feedback from Hillingdon and Harrow councils—has been covered by the forthcoming additional funding from MHCLG. I might not be expected to say this as a serving vice-president and former Conservative group leader at the Local Government Association, but MHCLG has rightly been coming forward with that funding. With respect to the points about how expenditure has changed over time, it is important to recognise that many authorities have, of course, not historically benefited from additional funding based on deprivation. Many of the authorities that have been criticised never had the extra money to cut in the first place.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) for securing this important debate.
As far back as May, I wrote to the Secretary of State for Housing, Communities and Local Government asking for a cast-iron guarantee that the Government would deliver on their promise to cover the costs of local authorities’ response to the pandemic. At the time, Stockport Metropolitan Borough Council in my constituency was facing a shortfall of £41 million, like other councils, and that shortfall has now increased considerably. Six months on, we are still awaiting an assurance from the Government, while local authorities continue to be pushed into the red as they struggle to stump up funds to safeguard the lives of their citizens during the latest wave. Faced with economic ruin, the council was pushed into the dark, as we saw most recently when the London Borough of Croydon was forced to file for bankruptcy after being unable to address a £66 million black hole.
Our councils continue to do the job of ensuring that everyone receives the support they need during this incredibly troubling period. I have enormous respect for them and am incredibly grateful for the work that they have continued to do in challenging circumstances. The deputy leader of my council in Stockport, Councillor Tom McGee, is a fine public servant and I thank him for ensuring that our local public office holders are updated at every stage of the pandemic and are aware of the challenges faced by our local administration.
Nobody expects the Government to have foreseen a global pandemic, but it is clear that a decade of austerity—an ideological choice, not an economic necessity—has ravaged local authority finances and left them weakened, forcing councils to delve into their reserves to redress the central Government shortfall. To put that in context, Stockport council went into the crisis with over £100 million already slashed from the town hall budget since 2010. The council has now been forced to step in to compensate for the Government’s insufficient funding, and local authority budgets are stretched even further. During the first wave alone, the funding black hole for Stockport council was £25 million. Failure to underwrite council expenditure will have dire consequences for my council and leave it with little alternative but to consider dramatic measures such as issuing section 114 notices to curtail all but essential spending, leading to wholesale reductions in services for all those living and working in Stockport.
The Government must urgently intervene to ensure that all councils are in a position to protect their citizens and prevent other services from going to the wall, including libraries, parks, museums and leisure services. Adult social care is one area that cannot be overlooked, and it is already under enormous pressure, as was mentioned by my hon. Friend the Member for Bethnal Green and Bow. The Government need to resolve the funding crisis in the adult social care sector. The Local Government Association recently estimated that social care services face an additional cost of over £6.5 billion to cover costs. The main three areas are PPE, increased staff costs, and increased cleaning and overheads.
In addition to the vast expenditure that local authorities are forced to cover during this period, many have seen their incomes cut dramatically. Every council in Greater Manchester, for example, has been hit by the drop in the dividends from Manchester airport on which it relies. For Stockport council, that means that more than £6 million has been lost, placing further strain on services and jobs—and that is even before we factor in the significant number of jobs lost in the aviation sector more widely, where many of my constituents work in the UK’s third-largest airport.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) for securing a debate on this topic, the impact of which is felt by our constituents deeply. As a Member in the London Borough of Tower Hamlets, she is right to highlight that the area has the highest rates of child poverty in the country.
The covid-19 crisis has emphasised starkly the importance of local services in making sure the essentials of life are never denied to people because of their circumstances. As has been argued by others, at the core of the issue is the need for sustainable core funding for local government—a need that is urgent and critical, and yet this year’s spending review will not be comprehensive. The multi-year review that we were originally promised is unlikely to deliver funding for local services at the level required, nor is it likely to recognise the role of Government investment, public ownership, in-sourcing and care in what must be a green sustainable recovery that delivers for people. On top of that, there is a public sector pay freeze looming for public sector workers who have kept the country running throughout the pandemic.
People all over the UK are being let down by patchy support measures that result in unfairness, injustice and hardship. That is despite people continuing to work hard, whether it is from home, in cramped conditions with limited equipment, balancing paid work with caring responsibilities; being forced to work in unsafe conditions without the protections needed; or supporting others around them unpaid. The challenges in my borough cannot be underestimated. We have the fastest-growing population in the country—it has doubled in the past 30 years and is projected to grow by a further 67,000 in the next 10. As demand increases, funding reduces.
Universal basic services, of which local services are a cornerstone, was an idea at the heart of the 2019 Labour party manifesto that I was elected on. It was not only about protecting the free services that we have; it was a vision to extend the services that we should all have access to, from free travel on buses for the under-25s and full-fibre broadband free for all, to free school meals for primary school children. In health, it filled the gaps in hospital car parking and dental care. In social care, it addressed the crisis by pledging free personal social care. Despite the barrage of criticisms by the right-wing media during the election, that never sounded like a wish list to me, but rather the foundation for a decent life for everybody in the 21st century. It is an idea that has underpinned our treasured public and local services ever since Beveridge argued for the state provision of national minimums for essentials.
Collectively provided services such as our schools, libraries and parks do not just bind us together as a society; they transform lives. Events this year have made that truth even more clear. Yet just today, a report by Victim Support further emphasised the need for victims of domestic abuse, who are in urgent need of additional support as the country looks ahead to months more of lockdown restrictions. It is overwhelmingly obvious that years of cuts and a failure to invest in services made the UK extremely ill prepared to deal with a large-scale health risk to our community. Further cuts on the horizon to services such as special educational needs support, adult social care, library services and leisure centres, to name just a few of the areas that I am being contacted about by constituents, will have a disastrous impact on local people and communities that were already vulnerable before the pandemic.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) on securing this important debate.
Speaking as a sitting councillor on Luton Borough Council and as a vice-president of the Local Government Association, I too thank all the officers and workers at Luton Borough Council, and all those working in councils across the country who have shown brilliant leadership and determination throughout our coronavirus response. Their local expertise has been critical to delivering services for our communities, from supporting the roll-out of testing to ensuring that the most vulnerable can access food. It is important to note that they have worked alongside NHS and other public service workers, including the fire and rescue service and the police.
Local authorities across the country have stepped up, as we know, delivering vital additional support at pace, despite suffering a £15 million cut in core local government funding since 2010. As was mentioned, the National Audit Office has calculated that local authorities have seen Government funding reduced in real terms by almost a half since 2010-11. Austerity has left many councils understaffed and underfunded, with demand for many services, such as adult social care and children’s services, increasing. The pandemic has compounded those existing difficulties through extra costs, lost income and cash-flow pressures.
Since 2010, Luton Borough Council has had £138 million cut from its budget. It tried to mitigate the impact by generating increased income from Luton airport, which it owns, to fund council services. However, covid-19 health restrictions affecting aviation have caused that income to dry up, meaning the council will not receive its forecast £20 million annual dividend and the £9 million donation to our local charity and voluntary sector is at risk.
Although the Government stated that councils would receive the support they need to get through the crisis, and have acknowledged Luton Borough Council’s exceptional circumstances due to the airport, there is a requirement for local councils to set balanced budgets in year, so in the absence of any specific and exceptional Government finance to compensate for loss of commercial income, Luton Borough Council has had no choice but to implement an emergency budget that has made £22 million of in-year cuts. This is affecting our non-statutory services, which are highly valued by local residents. At a time or rising unemployment, 400 jobs will potentially be lost.
I recognise that the Government have made some additional grant support to councils, but it barely scratches the surface of the problem. Without a funding package that considers years of underfunding under a decade of Tory austerity and the instability caused by the pandemic, services in adult social care, public health, homelessness support and children’s services are at risk. The Local Government Association is calling on the Government to provide an additional £8.7 billion in core funding in 2021-22. That consists of £4 billion for the current funding gap to sustain 2019-20 service levels, £1.8 billion to deal with other quantifiable pressures to stabilise the sector, and £2.9 billion for other core funding requirements to help councils improve their core service offer.
We also need a long-term council funding review that begins to rebuild local resilience, as local councils must be at the heart of building back better in our communities. For the sake of our communities across the country, I hope the Minister has been able to persuade the Chancellor to announce a package along those lines in tomorrow’s spending review.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) on introducing this debate. I am increasingly concerned about the finances of City of York Council, in terms of both sufficiency and its investment choices.
Staff have been incredible in the way they have stepped up in this crisis, working in the most difficult circumstances and going above and beyond. Social care staff have put themselves at risk to meet demand. Social workers have found new ways to safeguard children. Refuse staff have continued to keep our streets clean and bins emptied. There are so many more I want to thank today. The increased demand on them must be recognised. More than claps and kind words, they must receive a proper pay rise this year. If the Chancellor reneges on that, it will never be forgotten.
In York, due to the high rateable values, need has not been met by grants. As offshore landlords have pocketed the benefits of these grants in their tax havens, businesses are vanishing from our high street. Labour wants councils to be able to support the local economy. In York, where 30,000 people work in hospitality, retail and tourism, we have the worst-hit high streets in the country and are one of the worst affected places in general. The 8 million visitors who normally come to our city just are not there.
I want to point to a few specific areas. We know there has been increased demand in domiciliary care, because families are not placing people in care homes for fear that they will not be able to visit and because of the risk of infection. The costs have increased significantly over the last few months and must be met. The same is true of charities. When it comes to the end of the financial year, many are fearful that they will not see their contracts renewed. Already £10 billion in debt, they need security in order to safeguard their futures. As the sector says, charities have never been needed more, but we must also recognise that they have never been more in need themselves.
On public health, it has been an incredible story in York. As we were heading into tier 3, we were able to turn the ship around, bucking national trends and reducing infection rates considerably. Contact tracing has been at the heart of that, yet we need more funding to do more to ensure that we lock down this virus in future, not people or the economy. I trust that the Minister will look at the resourcing of public health to ensure that it can do its job with sufficiency.
On the investments of City of York Council, at the heart of my constituency is York Central, the largest brownfield site in the country—I know that the Minister and I are going to discuss this. City of York Council has invested £35 million, which will turn out to be about £57 million. The other delivery partners, Network Rail and Homes England, will get their costs back plus 20% profit from the development, but City of York Council will not see such a return.
That needs scrutiny, not least in the light of the current situation, and because of its other poor investment choices, such as paying out £500,000 to a former chief executive, which the auditors are, rightly, not happy to sign off. There is something that needs investigation, and I trust that my discussions with the Minister will get to the bottom of those issues so that we can spend our money wisely in our city.
Local authorities all over the country are the frontline in this public health crisis. As a recent all-party parliamentary group on faith and society report shows, councils have set up imaginative partnerships with faith groups to provide food and care to struggling families. I support the call made recently by the hon. Member for Devizes (Danny Kruger) in his report to the Prime Minister for a new deal for faith groups.
Covid-19 hit Newham, my very diverse borough, extremely hard. It is next door to Tower Hamlets, which we heard about from my hon. Friends the Members for Bethnal Green and Bow (Rushanara Ali) and for Poplar and Limehouse (Apsana Begum). As elsewhere, the council has been imaginative and effective. It recruited volunteer health champions to disseminate key health messages and to obtain feedback from the community. It set up Newham Food Alliance with faith and community groups. Bonny Downs Baptist church, Highway Vineyard church, Manor Park Christian Centre, Ibrahim mosque and the Newham Community Project have all done extraordinary work in East Ham.
The council has increased support for temporarily accommodated homeless families and it has extended support to rough sleepers and families with no recourse to public funds. It has spent £25.3 million extra on the pandemic this financial year. It has lost £13.3 million in income and has been unable to deliver £7.4 million in planned service cuts. That is a £59.5 million hit, but Government funding has been £36.8 million.
Some 3 million extra people have had to claim universal credit this year, but hard-working families, who work legally but have no recourse to public funds due to their immigration status, do not have that safety net. They can get council help under section 17 of the Children Act 1989 if they have children, and under the Care Act 2014 if they need additional care.
In March, local authorities were told by the Minister to support single homeless adults without care needs. I very much applaud his initiative—I wish the Home Office had shown a similar degree of enlightenment—but there was no clear legal basis for that instruction, so provision has varied immensely.
Local welfare assistance and £500 track and trace payments are available for families with no recourse to public funds only by discretion. Andy Jolly of the University of Wolverhampton reports that many families were refused council help during the pandemic. We need new funding for basic council support for families with no recourse to public funds. Will the Minister commit to providing it?
It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) for securing this important debate. I also thank and pay tribute to everyone at Coventry City Council who has worked tirelessly through the pandemic, as they did before it hit, to care for the city’s residents and keep services going, even as workloads have been stretched and budgets have been pushed harder.
The truth is that local authority budgets were in crisis way before the pandemic. They have faced a decade of brutal Tory cuts. In Coventry, that has meant a cut of £120 million to the central Government grant every single year since 2010, meaning a total reduction of funding of £1.2 billion to date. That amounts to nearly £350,000 in lost funding every single day.
It is a similar story across the country. The National Audit Office estimated that between 2010 and 2018 central Government funding for councils was slashed by nearly 50% in real terms. Those cuts have meant a decade of youth club closures and children’s centres having to shut down, and domestic violence refuges and homeless shelters being forced to close their doors. My inbox is inundated with people struggling on the housing waiting list, which now stands at 14,000 people in Coventry. That is what a decade of Tory cuts looks like.
Local authorities have now been rocked by the impact of the pandemic. Councils have been forced to spend more to meet rising needs, and their budgets have been hit by a loss of income in tax receipts and business activity. When we take into account the effects of austerity and covid on local authorities, we see how utterly inadequate the Government’s funding announcements truly are. Councils do not just need eight months of funding to be plugged; they need 10 years of cuts to be reversed.
The crisis has highlighted how fundamental our local authorities are and it has shown who our key workers really are, too. They are not the hedge fund managers or the City bankers, who have had it so good for so long. They are the carers looking after our older residents in Coventry, the refuse collectors and the street cleaners, and the working people who have kept our country going. I will finish by placing on the record my thanks to them.
I call on the Government not only to compensate local authorities for temporary funding shortfalls, but to give them the funding and the powers they need to tackle everything from the housing crisis to the social care crisis, to give low-paid staff the pay rise they deserve, and to truly meet the needs of our communities.
It is a pleasure to serve under your chairmanship, Mr Hollobone. I pay tribute and give my thanks to the hon. Member for Bethnal Green and Bow (Rushanara Ali) for securing this important debate.
I will focus my few remarks on the support that local authorities have given, and continue to give, to businesses. Thanks to Government support, South Lakeland District Council provided the largest single number of grants to local businesses of any shire district anywhere in the country, and it is not hard to understand why that would be the case. We are the tourism epicentre of the United Kingdom and, after London, the biggest visitor destination in the country. The largest single employer is hospitality and tourism, and at the worst part of the crisis 40% of the entire workforce of my constituency was on furlough. We have seen a sixfold increase in unemployment.
The diversity of employment is significant as well. One in four people in my constituency work for themselves. At the beginning, after initial grants and furlough, which were very welcome, were correctly provided by the Chancellor, there were some gaps in support. Discretionary awards were then made through local authorities and delivered expertly, fleet of foot, by local authorities, including my own in South Lakeland, to people such as small bed and breakfast owners, those who ran businesses from their own home or shared space with others, or those who did not get any support in the first tranche. Thanks to the campaigns of many and the Government listening, on that occasion, district councils such as mine were able to provide support, and they have done so well.
That gives us a clue as to how the Government should behave towards the remaining 3 million people who have still received no support. I am thinking about many people on maternity leave; people who have been self-employed for less than 18 months; those who are running small, limited companies, such as taxi drivers, hairdressers, personal trainers and the like; and those who just missed the cut-off date for the payroll, at just the wrong moment in March.Those people have been left with zero support since March and are struggling to pay their rent or mortgage and feed their kids. I pay tribute to them for their campaigning. I beg the Government to allow councils to do for those people what they did for the first set of excluded people back in March and April.
I thank councils for all they do at the forefront, providing social care, schools, special educational needs provision and child protection, and looking after the homeless and those in housing need. I am confident that in Cumbria we had the most effective localised Test and Trace system in the country, with public health being run incredibly well at a local government level in my community.
I will just say, on top of all that, how odd it is that the Government think this is somehow a bright period in which to force top-down reorganisation of local government in Cumbria, North Yorkshire and Somerset. Even if a Government thought there was some wisdom in changing the balance of local government in those places, how crackers—how out of touch—would they have to be to think now is the moment to do it? I urge the Minister to provide funds for local authorities to support those who have been excluded from support so far, and to not distract our social care home managers, our carers, our teachers, those people caring for the homeless, and those leading the economic recovery in our communities. Do not divert them from their vital task by a pointless act of navel contemplation—a top-down reorganisation.
It is a pleasure to serve under your chairmanship, Mr Hollobone, and I congratulate my hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali) on securing such an important debate.
I will start by paying tribute to the council staff across England who have worked so hard to keep our communities safe in difficult circumstances throughout this pandemic. I have seen at first hand the efforts of council staff workers in Bradford West from the very outset of this virus—the hard work they do to minimise and prevent the spread of infection, get help to the vulnerable and support the care sector, work to sustain our businesses and the economy, keep essential services such as refuse collection and bereavement going, and much more, including setting up local Test and Trace services before there was any commitment or financial support from the Government. That has been the case for councils up and down the nation.
However, local government is at a crossroads. A decade that saw £15 billion cut from local authority budgets has ended with the impact of covid-19 driving up costs and cutting income, leaving councils across the country facing huge challenges to set a balanced budget. Many of my colleagues have mentioned those budget cuts, particularly my hon. Friends the Members for Leeds North West (Alex Sobel), for Barnsley East (Stephanie Peacock), for Stockport (Navendu Mishra) and for Poplar and Limehouse (Apsana Begum). The numbers do not look good for any of those constituencies.
Without proper funding, there is a real risk that councils will not be able to balance their budget, as they are legally required to do. Councils do not want to have to make those hard choices, but they have been left with little choice by the Government. Vulnerable people across the country will suffer the most if councils are forced to stop delivering the crucial services they rely upon. The tragedy of this is that after a decade of austerity, councils will be forced to cut back on funding again. Additionally, it has been reported that the Chancellor is considering a public sector pay freeze. Can the Minister clarify whether he feels comfortable clapping public sector workers as we entered the pandemic, and cutting their futures as we start to come out of it?
Since the beginning of the pandemic, councils have sent detailed financial returns to MHCLG each month, so this time around, the Government cannot feign ignorance. Ministers know exactly how much local government is out of pocket by. Despite the fact that at the Government’s daily press conference in May, the Communities Secretary said he would “stand behind councils”, it is clear to leaders of those councils that that promise will not be kept. Nor is this a short-term issue that will go away after covid; these funding pressures are cumulative. Councils are losing out on fees and charges from sources such as leisure centres and car parking: as my hon. Friend the Member for York Central (Rachael Maskell) said, York has lost 8 million visitors due to covid-19.
There is no guarantee that there will be a return to normal next year, either, and it is not just me saying that. According to analysis by the cross-party Local Government Association, councils in England will face a funding gap of more than £5 billion by 2024 just to maintain services at current levels. The present national lockdown has no doubt made the funding crisis more acute. The same concerns have been raised by the Conservative-led County Councils Network, and the evidence from witnesses at the Select Committee on Housing, Communities and Local Government has been equally concerning. I also agree with the concerns that the chair of the all-party parliamentary group, the hon. Member for Waveney (Peter Aldous), mentioned earlier.
I hope that the Minister can provide some clarity about how the Government intend to deal with the huge challenges facing local government, and that he will be able to answer some questions. However, before I get to those questions, I want to talk about places of worship. My right hon. Friend the Member for East Ham (Stephen Timms) highlighted the role of mosques. I have seen at first hand the role of mosques in my constituency, but ahead of the spending review, I have also had some conversations with local churches. The churches, mosques and all places of worship in my constituency have already been picking up the pieces of 10 years of austerity from Government cuts, including through food banks; across the country, each church equates to £300,000. There has been no commitment to help where churches or mosques are picking up the council pieces. Can the Minister highlight what is going on with the funding allocated to places of faith?
I understand that the Prime Minister’s adviser, Sir Edward Lister, wrote to councils under tier 3 restrictions to advise that they would not be asked to set a balanced budget this financial year. Will the Minister clarify how that will work and whether it will apply to those councils that are subject to increased restrictions after 2 December? Will he also clarify how much has been paid to local government to date, through his Department’s scheme to replace lost income and fee charges? Will he say whether his Department is considering further financial support for councils returning to the higher tiers of local restrictions after 2 December? Can he confirm whether that will be based on need or per head of population?
The Transport Secretary highlighted today that the Government would not engage with regional Mayors as we enter the new tiered system. Have the Government abandoned their pledges on devolution, and should we expect further Whitehall rules for the future of this Government? Finally, will the Minister clarify when the local government financial settlement for 2021 or 2022 will be published? My hon. Friend the Member for Bethnal Green and Bow (Rushanara Ali), who secured this debate, laid out very eloquently the challenges that are faced. Councils have to make a choice: will they cut library services, refuge services, frontline workers, bin collections—what will face the axe next? Councils are between a rock and a hard place when making these decisions.
We have already seen the fiasco where the Government took the decision to centralise Test and Trace and give the contracts to Serco. My understanding is that Serco did not even have any penalties in its contracts. In my constituency, and others I have seen with a high prevalence of covid-19, people have been door-knocking and managing to test, isolate and track people locally. They have managed to isolate outbreaks, but the Government are not putting their money where their mouth is. That is an added pressure to those that councils already face.
We have had 10 years of austerity, followed by covid and a Government who have gone into national lockdown instead of taking a circuit breaker, which we advocated. That has had even more of an impact on our councils. They really need certainty. In Bradford, our councils have already had so many cuts, as have the councils of every Member on both sides of the House. Nobody is denying that we have had cuts for the last 10 years. Will the Minister confirm that the Government will be putting their money where their mouth is? Did they mean it when they said, “We will do whatever it takes”? Will he give the councils that reassurance?
It is a pleasure to serve under your chairmanship, Mr Hollobone, and to be back in Westminster Hall after such an absence. It is an important Chamber in which to hold debates such as this one, to raise issues such as local government finance and so on. I am hugely grateful to the hon. Member for Bethnal Green and Bow (Rushanara Ali) for securing the debate and for opening it in such a pragmatic, sensible, level way, which highlighted some of the issues facing local government. I thank her for the tone in which she opened the debate and I thank hon. Members for their contributions. I will do my best to address all the points that have been raised.
First, may I place on the record my thanks to local government? The work that those who serve in local government have done in these extraordinary times has been remarkable. They have risen to help us as a country respond to the incredible challenges we are facing and worked tirelessly to help us through the pandemic. From their incredible work protecting rough sleepers, offering over 90% of them accommodation within just a few days of the start of the pandemic, to the work they have done on testing, alongside NHS staff, to keep our parks, public spaces and schools open, and helping vulnerable people, including victims of domestic abuse, the response has been truly remarkable. I know that if the Secretary of State and the Prime Minister were able to attend, they would put on the record their thanks for the remarkable work of councils, councillors and officers around the country who have done so much to support their communities, their businesses and vulnerable people.
Much of today’s debate has been about the response to the pandemic, so I will start my remarks there. In responding to the pandemic, we have built on what was a good local government finance settlement for this financial year: a 4.4% real-terms rise in core spending power for councils. We were genuinely grateful for the Opposition’s support for that finance settlement and hope to have their support again. Clearly, they will look at the detail carefully when the Chancellor makes his statement tomorrow and when the settlement is published, but we were grateful for the cross-party support this year, which we hope will be forthcoming again.
We have been determined that no local authority should face unmanageable spending pressures because of coronavirus, and we will continue to deliver on that commitment. That is why, following the announcement of the winter plan this week, we have allocated up to £8 billion this financial year to support councils throughout the pandemic. Crucially, that includes £4.6 billion of non-ring-fenced spending so that councils can make decisions at a local level about how that money is spent and how resources should be deployed, because councils know their communities best and are best placed to make those decisions.
A number of hon. Members mentioned the financial returns that we have asked councils to submit throughout the pandemic. I am grateful to councils for doing that so diligently. Our information shows that councils spent £3.6 billion from March through to the end of September on covid-related pressures, so we hope and expect that £4.6 billion of non-ring-fenced money has helped councils with those expenditure pressures.
It is worth putting on the record the other support that local government has received from Departments across Whitehall since the start of the pandemic. That has included: £1.1 billion for the infection control fund, which has helped support adult social care providers to reduce the rate of transmission both in and between care homes, and to support the wider workforce, which has been vital; £300 million of support for councils’ Test and Trace activities; £485 million to support implementation of the national restrictions, which has been extended to the end of the financial year; £91.5 million for councils to ensure that rough sleepers do not return to the streets, as announced in September; £170 million for the winter grant scheme to support families and children; and over £22 billion in grants and reliefs for businesses at this challenging time. We believe that funding package is unprecedented.
Hon. Members commented on what extra financial support will be available now. I reiterate the point made yesterday by the Prime Minister, who confirmed further support for councils as we return to the tiered system of local restrictions with the extension of the contain outbreak management fund for the rest of the year. That will mean a payment from the Department of Health and Social Care to upper-tier local authorities of £4 per person per month in areas with very high restrictions for the rest of the financial year.
Hon. Members made points about the distribution of funding throughout the four tranches of local government finance support since the start of covid. We have distributed non-ring-fenced funding using a covid relative needs formula. It is important to state that the formula accounts for the main drivers of covid-related expenditure. Yes, of course that includes population, but it also includes deprivation, which is crucial, as well as the various cost adjusters for delivering services in different parts of the country. We think that was the right system when considering how to distribute money between councils.
Members also pointed out that it is not only additional covid spending pressure that councils have faced; many have also had to deal with tax and income losses. That is why, alongside the funding we have put into local authorities, we have introduced measures to help them manage the loss of income from tax and transactional services, sales, fees and charges. That is a substantial scheme. It compensates councils for lost income from key services, such as car parks and libraries, which are normally funded through sales, fees and charges but clearly have been largely closed or underused during the pandemic. Alongside that, we have given councils the flexibility to spread their tax losses over multiple years, rather than the usual one year. We have committed to set out further details at the spending review—we do not have too long to wait—on how we will apportion the lost tax income between central and local government. I know that councils are keen for clarity on that point, and it will be provided shortly.
There were a number of representations about the spending review itself. I understand that this is a perfect time for that conversation to happen, and those points have been made. I will answer some of the points specifically, but the representations about spending for local authorities, an increase in core spending power, social care funding and the share of the council tax burden and grant have certainly been heard. Those points were well made.
The hon. Member for Poplar and Limehouse (Apsana Begum) mentioned the one-year spending review and how it would have been more suitable to have a longer-term settlement. I understand that point, but unfortunately we are in a place now where long-term planning is difficult to pursue, so we think it is right to concentrate on the covid-19 response. However, we absolutely share councils’ desire to return to longer-term financial planning. That has been a key ask of councils, and once we are through the pandemic we aim to hold a multi-year spending review settlement.
The hon. Member for Bradford West (Naz Shah) asked a number of questions, which I will try to address. She asked about engagement with regional Mayors. That is a really important point. The Secretary of State and I spoke to all regional Mayors across the country last night. We have an open offer of conversation and continued engagement with them. We also had a webinar with local authorities yesterday, which every leader and chief executive was invited to. Hundreds of councils joined that call, and that engagement is hugely important to us as we progress through this period. We actually continue to have regular webinars and discussions with council leaders across the country, answering their questions on an almost weekly basis, which has been hugely informative.
I hope that I have answered part of the point that the hon. Member for Bradford West raised about the £4 per head in new funding. If she wants more detail on that after tomorrow, I am happy to set it out for her in writing. She asked about lost income and how much of that is being paid out. Most councils have now been informed about the first tranche of payment that is being paid out—millions of pounds. I am happy to share the details with her if that is desirable. She also mentioned public sector pay in local authorities. It is important to note that local authorities, working with unions and other employer bodies, take these decisions externally of Government, but she is absolutely right to put that on the record.
My hon. Friend the Member for Ruislip, Northwood and Pinner (David Simmonds) made sensible and important points about the long-term sustainability of funding and about funding reform. We would have liked to come forward with the fair funding review this year. Clearly, that is not possible in the current circumstances, but we continue to have that conversation. My hon. Friend the Member for Waveney (Peter Aldous) talked about the funding challenges facing counties and made important points about the spending review and the settlements. Those representations have absolutely been heard.
My neighbour, the hon. Member for Bath (Wera Hobhouse), who has understandably left the Chamber, made important points about the specific circumstances facing her local authority, which is unique in a lot of respects. I point her towards the sales, fees and charges scheme, which compensates councils for 75% their losses beyond the first 5% of planned income. I am always happy to meet her to discuss those unique circumstances. She also asked for certainty about leisure centres. The Department for Digital, Culture, Media and Sport will shortly set out more detail about the £100 million scheme for leisure centres. She makes an important point about the importance of those institutions for people’s physical and mental health. She is quite right to raise that.
The hon. Member for Luton South (Rachel Hopkins) talked about the genuinely unique circumstances that face her council. I hope she feels that we are working with her constructively. It is a unique situation and I am always happy to meet her and her council leader to discuss it, if that would be of use. I absolutely recognise the point she raises.
The hon. Member for York Central (Rachael Maskell) also raised the unique circumstances facing her local authority. I know that we are planning to speak soon, and I look forward to addressing the issues then. She also mentioned the spending review and local government pay, which I hope I have covered in my remarks.
The right hon. Member for East Ham (Stephen Timms) raised a number of issues. I join him in putting on the record my thanks to the incredible organisations in his constituency and his local authority for the work they have done on rough sleeping, which I know is a huge challenge. I know how committed they are to that issue and to supporting people. I thank them for the work they have done in the “Everybody In” campaign. He also made passionate points about those with no recourse to public funds. I think we have made changes on that issue during the course of the pandemic, including extending the derogations to ensure that everybody can receive that basic safety net of support, further than the areas it had already been extended to.
The hon. Member for Westmorland and Lonsdale (Tim Farron) talked about some of the excellent work that his council has done, paying out grants and supporting businesses, and I commend it for that work. He also had passionate views about local government reform and the timings. He will be able to make that argument through the process in the right way. I know he feels strongly about the matter.
I want to thank again the hon. Member for Bethnal Green and Bow, who made a number of hugely important points. She talked about targeted funding. I hope she feels that we are doing that through the equalisation we did last year, to ensure that the local authorities affected most by the social care precept are seeking that extra support. I thank her and I am at her disposal, if she needs to talk about that further. I would like once again to thank all local authorities up and down the country. I believe that this unprecedented package of support is supporting those councils and I thank them for their work.
I thank the Minister for his response and the shadow Minister for her contribution. I want to reiterate my gratitude to local council leaders and officials up and down the country, and to all those working with them. Others have talked about interfaith organisations and I pay tribute to the interfaith groups in my constituency, who acted weeks in advance of the lockdown, which I know saved a lot of lives. That is credit to the local authority and its co-ordination efforts.
I also want to pay tribute to the mayor, deputy mayor and councillors in my constituency, and the chief executive of Tower Hamlets Council, Will Tuckley, and his officials for all that they have done. As I said earlier, we have faced unprecedented challenges in Tower Hamlets.
I am heartened by what we have heard today, because we have been able to build a broader consensus across parties in those contributions, focusing on the quiet heroism of local council officials, leaders and councillors. Whichever party they belong to, the pandemic has shown that they have gone beyond the call of duty in protecting people and addressing some of the systemic problems and funding issues that they have all faced to varying degrees. They have got people off the streets, kept our libraries and leisure services open when possible and closed them when needed. As many have said, local authorities not only lack sufficient funds for covid, but have lost income as a result of the pandemic. There is still a shortfall of more than £7 billion. I hope the Government will address that in the announcement tomorrow.
Hon. Members have talked about funding for SEND children, adult social care and the need for longer-term funding, which is crucial for budgeting. Many issues have rightly been raised. What we need, however, is a collective effort, perhaps starting with this group of Members of Parliament, to speak to the Chancellor and the Prime Minister. I know that some hon. Members have closer ties than others. I appeal to all colleagues to use their influence to get the funding that local authorities desperately need, not only to face the crisis and defeat the virus, but to protect our communities.
The hon. Member for Devizes (Danny Kruger) talked about the shortfall of about £30 million in his constituency—he represents a much more affluent seat than mine. Whether they are affluent or poorer areas, we have seen the impacts, so we need to address those issues rapidly.
Motion lapsed (Standing Order No. 10(6)).