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Covid-19: Local Government Finance

Volume 804: debated on Tuesday 7 July 2020


Asked by

To ask Her Majesty’s Government what assessment they have made of the financial stability of local government in England in the light of the additional (1) costs incurred, and (2) income lost, as a result of the COVID-19 pandemic.

My Lords, councils across the country are supporting communities, protecting the most vulnerable and helping the NHS in its efforts to combat Covid-19. We have made £3.7 billion in un-ring-fenced funding available to local authorities and have introduced a targeted income support package so that they can address pressures in response to the pandemic. In total, the Government have committed nearly £28 billion to local areas to support councils and their communities, alongside more than £5 billion of cash-flow support.

My Lords, I refer the House to my relevant registered interest as a vice-president of the Local Government Association. Using his experience as a former leader of a large London borough council, what words of advice is the Minister giving his right honourable friend Robert Jenrick to help the Secretary of State stand up for local government in his discussions with the Chancellor of the Exchequer?

My advice to the Secretary of State would be to focus on the three pillars of support that we need to give councils. We are covering demand pressures through the Covid-19 pandemic and we have announced an income support package. Councils are also facing irrecoverable tax losses, and the principle of sharing that between national and local government has been agreed, but not the precise proportions. I would therefore encourage my right honourable friend the Secretary of State to agree that with the Treasury as part of the spending review.

My Lords, further to the Question asked by the noble Lord, Lord Kennedy, on financial stability, local authorities borrow substantial sums of money from the market. While some local authorities have recently had their credit rating reduced, most have so far maintained high ratings, enabling them to borrow cheaply. Will my noble friend do all he can to take the necessary steps to ensure that this remains the case to avoid further pressures on local authority budgets?

My noble friend is right to say that the credit ratings of local authorities remain strong, and where there have been some downgrades, that happened before the pandemic. I have made an undertaking to see that local authorities continue to get access to funding. However, we should recognise that the main lender to them is the Public Works Loan Board, which is an agency of HM Treasury.

My Lords, given the current concerns about social care, how will the Government support local authorities to improve and extend meeting social care needs, particularly in the light of a potential second wave of Covid-19?

Adult social care is a considerable part of local authority financing—approximately one-third for most councils. It is worth noting that around 40% of the funding provided so far to meet demand pressures has gone to adult social care, and as we have made the commitment to support those demand pressures through the pandemic, that continues to be a feature of the money that is being provided to local authorities. Whether further funding is required is being kept under review.

Is the Minister aware of the effect that local authority funding problems have had on the voluntary and charitable organisations which provide many services to individuals and communities? They have lost both grant funding from and contracts with local authorities and many are now under threat of closure. How do the Government intend to ensure that these vital services are safeguarded? I declare an interest as president of the NCVO.

The commitment to the local voluntary sector has been covered by the large grant that has been made available by the DCMS. We recognise the important part that local government plays in providing funding to the third sector. That will continue to be made possible because of the support that we are providing both in income support and to meet demand pressures. The third pillar, which is the loss in tax revenue, has been covered in part as well.

First, I thank the Minister personally for the support that has been given to Greater Manchester during the pandemic. The 10,000 laptops and devices that have been distributed across the region will make a real difference to disadvantaged children who need this help in these difficult times. However, the broader issue of local government funding needs to be addressed. Will the Minister commit today to do all he can to ensure that the Greater Manchester deficit, which is running at £378 million and growing, will be clawed back?

We are aware of the specific problems with regard to Greater Manchester. These are being exacerbated by the loss of the dividends that it normally gets from the airport, which is clearly having an effect on local authority incomes. I can commit that the department will continue to work closely with Greater Manchester councils to ensure that if a bespoke package is needed, that will provided for them.

My Lords, I declare my position as a vice-president of the LGA. I welcome the £1.57 billion rescue package for the arts that the Government announced for theatres, galleries and museums, but can the Minister tell me how much of it will be distributed by local councils? In a normal year, they put more than £1 billion into the arts around the country. Can the Minister reassure me that this money will not go to just a few large institutions, particularly in London, but will be spread around the country through local councils, so that we can hope to rescue and protect wonderful institutions, such as the theatres in Southampton and Sheffield—where I am speaking from now—and little rural arts centres up and down the country?

I can give a commitment that funding will extend beyond a few well-known names to the important local theatres and museums that are often supported by local authorities. I cannot give the noble Baroness the precise extent to be distributed via local authorities and will have to write to her with further information on that.

I was formerly the leader of a local authority in London, as was the Minister. We both appreciate how important local authorities are to the public. Yesterday, we had the Second Reading of the very important Business and Planning Bill. It will have implications for local authority expenditure, and some charges, I imagine. Is the Minister in a position to confirm that the Government will make sure that all those costs are covered? Finally, on care homes and social care, the Government have to recognise that procedures were not adequate for the transfer of patients from hospitals to care homes, in the early stages of the pandemic. There were huge costs incurred and the Government must pick up the bill. Can the Minister confirm that that will be looked at?

I confirm to my noble friend that the guidance on care homes was not as clear as it could have been. He is right to raise the lessons we have to learn from that. On the pressures from the Business and Planning Bill that is going through the House, I guarantee that any additional burdens on local authorities will be covered by the new burdens doctrine, as soon as they are identified.

My Lords, this has been a particularly tough period in the history of local governance, with the LGA playing an instrumental role. Do the Government recognise that a funding gap will remain, even after the injection confirmed by the Minister just now? To address this, do the Government have plans to give greater autonomy to local authorities, as part of any new financial settlement to enable councils to get on the front foot, possibly achieved by spreading tax deficits over three years rather than the usual one?

It has been announced that tax deficits will be deferred over three years, rather than one. That was directly in response to the Local Government Association. It is clear that the financial stability of local councils is being kept under review, with monthly updates to the department. I am sure that more announcements will be forthcoming.

My Lords, is the Minister aware that, because of Covid, referrals to children’s social care have fallen by more than half in some areas? Children’s services are braced for a huge influx of cases of children at risk when schools return. Will the Government make sure that those services have the extra funds they need to protect those vulnerable children? The £500 million allocated so far is simply not enough.

Social care for children is recognised as a priority service for the Government. I give the assurance that the funding required, as a result of demand pressures from this pandemic, will be looked at and covered.