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Covid-19: Local Government Finance

Volume 804: debated on Monday 29 June 2020

Private Notice Question

Asked by

To ask Her Majesty’s Government what is their response to reports that five of the largest councils in the United Kingdom may have to issue a notice under section 114 of the Local Government Finance Act 1988, as a result of a loss of income due to the COVID-19 pandemic.

The Government have made £3.2 billion available to local authorities through an unring-fenced grant so that they can address the pressures they are facing in response to the Covid-19 pandemic. We are working on a comprehensive plan to ensure councils’ financial sustainability for the year ahead, and we will continue to work closely with them to understand the costs that they are facing.

Despite what the Minister has said, Hansard of 28 April records the firm commitment of the Government to

“back councils with the financial resources they need”,—[Official Report, Commons, 28/4/20; col. 203]

including support for the loss of income as a result of Covid. Can the Minister please provide a firm assurance that the financial resources will be made available in any such comprehensive plan?

My Lords, I can give an assurance that a comprehensive plan will be announced shortly. It is a little unfortunate that the timing of this Question is before that announcement. Of course, these general measures will support the vast majority of councils through the difficult process ahead; any individual councils that have problems should contact the department, or myself or other Ministers responsible.

How would a chief financial officer judge the Secretary of State’s view at the No. 10 press conference on 18 April when he said:

“At the beginning of this emergency I told local councils that we would give them the resources they need to do the job. And I meant it.”

Would the Government consider asking CIPFA and the NAO to conduct a study of local government extra expenditure so there can be trust on both sides before any council declares bankruptcy?

We need to recognise that monthly reports are now provided to the ministry by all local authorities so we can keep track of expenditure. Broadly speaking, the first two tranches, totalling some £3.2 billion, are in line with—or approximately the same as—the money spent to address demand pressures related to Covid-19. In addition, a number of other steps have been taken to deal with cash-flow emergencies and other pressures. As I said in response to the previous question, the definitive financial plan will be made but we will continue to keep close contact with councils.

Will the Minister confirm that the Government will not try to push a greater financial burden on to council tax payers to meet the current funding gap, which should be met nationally?

As we have said, our focus is on covering both the demand pressures and the income deficit and on providing the comprehensive package that will ensure that council tax payers do not face that unnecessary burden.

Is the Minister aware, as a former leader of the London Borough of Islington, that key revenue streams in summer come from recreation, particularly by cricket clubs using council-owned pitches? Why on earth are the Government preventing men, women and young cricketers from playing just club cricket?

I know of my noble friend’s love of the game of cricket. I am sure that we can take that up with the Ministers responsible.

My Lords, it is not only these five councils who are facing severe challenges. Luton Borough Council in my own diocese, which is one of the most innovative and forward-looking councils in the country, owns Luton Airport. Due to the lockdown, the collapse of this income stream is resulting in a massive hole in the council’s revenue. What conversations have Her Majesty’s Government had with Luton Borough Council? What are the Government intending to do to support Luton?

I agree with the right reverend Prelate. A number of local authorities will feel impacts as a result of Covid-19 pressures, particularly Luton Airport. This was raised with me by officials who have been dealing with the local council. As I mentioned before, if there are specific councils that face unique problems, as in the case of Luton Airport, they should contact officials. These will be dealt with on an individual, case-by-case basis.

My Lords, I first refer the House to my relevant registered interest as a vice-president of the Local Government Association. Looking back on his time as a local authority leader, what words of advice does the Minister have for local authorities facing these challenges?

I thank the noble Lord for drawing attention to our respective backgrounds in local government. Clearly, the most important thing is to keep the important services of councils running—their care for the vulnerable and these other things. That is why 90% of the money given so far has been directed to those authorities with adult social care budgets, which provide such a large proportion of the cost-base of a council.

My Lords, these are exceptional circumstances. Can the Minister tells us whether, in order to prevent council bankruptcy, the Government would consider allowing local government the same privilege as the NHS of carrying its deficit forward into future years?

At the moment, all I can point to is the commitment by the department to ensure that the cost and demand pressures, as well as the income pressures, are covered by a comprehensive plan. In addition to the increase in funding for local authorities, that would obviate the need to change the way that local government is financed for the time being.

My Lords, can my noble friend confirm that the Government will not countenance local authorities becoming bankrupt, particularly in light of the enormous increase in pension deficits that councils will face and the fact that these pension schemes are not covered by the Pension Protection Fund? Members’ pensions would potentially be at risk should there be an insolvency.

My Lords, there is an absolute commitment to provide support for local councils through this extremely difficult period. My noble friend is right to point out the pressures we face in pension fund deficits, but that was there before the Covid-19 pandemic. Rest assured that there will shortly be an announcement of a comprehensive plan to support all our local authorities through this pandemic.

My Lords, the dire financial situation facing local authorities is yet another indication of the economic meltdown facing the country as a result of the pandemic. Does the Minister not agree that, rather than an ad hoc approach, this is the time for an emergency Budget?

My Lords, this is the time for a comprehensive plan to stabilise finances. As I have said, that announcement will be made shortly.

Does the Minister not accept that one of the consequences of this is the risk that cultural venues will be decimated in the areas affected? With them go not just the institutions themselves but their vital outreach programmes; the Minister mentioned them in an earlier answer. Will the Government commit to adequate funding being put in place to ensure that this essential engagement with vulnerable groups can and will continue?

My Lords, there is no doubt that there is pressure on the funding of our cultural institutions, but we must recognise that there has already been a commitment of £27 billion to local areas to support councils and their communities, including the £3.2 billion to deal with demand pressures. I recognise the important role played by cultural institutions in supporting many in our communities.

One option for the Government to see their way clearly through this financial crisis would be to undertake an equality impact assessment of taking no action—that is, assess the risk of a sudden halt in services to vulnerable groups. That would make it quite clear that it is more expensive to do nothing.

My Lords, I have made clear that this is far from a do-nothing Government. In just two months we have already provided £3.2 billion—an extraordinary sum—to deal with the demand pressures of Covid-19. I have also made quite clear that an announcement will be forthcoming in a few days to provide the support that councils need for the rest of the financial year.

My Lords, does my noble friend agree that, as well as providing the resource to help councils through this Covid crisis, local and national government need to come together after that and have a plan for the future and how best to benefit from all the opportunities from new technologies, not least artificial intelligence, distributed ledger technology, quantum computing and all the things that could deliver better services to residents by more cost-effective means?

My Lords, my noble friend is quite right that we need to think about how we can deliver services differently. The use of artificial intelligence and other technologies will provide an important way of being able to do that.

That has completed all the supplementary questions available. I now call on the Government Whip to move the adjournment.

Sitting suspended.