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Newcastle Lib Dem takes on Minister over local government finance cuts

December 18, 2015 11:54 AM

Lord Shipley Liberal Democrat Lords Principal Spokesperson for Communities, Decentralisation and the Northern Powerhouse and former councillor in Parklands Ward in Newcastle has tackled the minister for communities and local government over the new proposlas for cuts in funding for local governemnt

One figure missing from the Minister's Statement was the reduction by 24% of central government funding support for local government over the spending review period. When taking into account the forecasts of income raised locally by councils, the overall position is a 6.7% real terms reduction over those four years. However, that is of course a national figure and will be very different in individual authorities.

I remind the Minister that during the last Government, the National Audit Office consistently warned that the department needed to understand much better the impact of its decisions on local authority finances and services. The Public Accounts Committee, in a report two years ago entitled Financial Sustainability of Local Authorities, identified that while the department collected a significant amount of data from local government, it had not made clear how it would monitor councils' ability to cope with funding changes. Then, in November last year, the head of the National Audit Office warned:
"The Department really needs to be better informed about the situation on the ground among local authorities across England, in a much more active way, in order to head off serious problems before they happen"

Can the Minister say what the Government have done in response to the criticisms of both the National Audit Office and the Public Accounts Committee?
Much has been made of the extra 2% on council tax to help maintain adult care services, and there has been an admission that different councils will raise different sums of money from that 2%. In London, for example, Newham will only be able to raise 4.1% of extra funding whereas Kingston upon Thames will have 11.3% extra. What has been done to equalise the cash available in the central allocation of grant to reflect this? I note that in the Statement, the Minister said there will be an allocation of £1.5 billion to complement the new precept and then went on to say,
"that is, more goes to councils that raise least from the precept".

So far, so good, but does that mean that enough is going to those councils? Simply telling us that more is going to go to them is not sufficient. Will the Minister bear in mind that the total sum being made available falls well short of the £6 billion the Health Foundation estimated will be needed by 2020?
Much is being made of the fact that by the end of this Parliament, local government will keep all the revenue from business rates. I understand that there will be guarantees of continued comparable funding at current levels, but any growth will stay locally. One consequence of that is that poorer areas are likely to get poorer while richer areas, because they can keep an increase in business rates income, are likely to get richer. What is the Government's policy on equalisation, given that there will be no more revenue support grant?

Finally, earlier this week we heard that inspection figures indicate that the number of children's services departments rated inadequate outnumber those rated good. This was described by the Government as a failure of state provision, but the implication was that it was all the fault of local government. We have reached a tipping point whereby the availability of money matters, and the Government have an absolute obligation to meet National Audit Office criticisms of their lack of understanding of the consequences of their actions. Government cannot go on requiring councils to deliver more services to more people with less real cash. It is an impossible task; will the Minister care to admit it?

Boness Williams of Trafford, The Parliamentary Under-Secretary of State for Communities and Local Government, replied in part

Lord Shipley.... absolutely right about the revenue support grant. It will reduce to virtually nothing by 2020 and the figure for this year shows a reduction, because of the increasing localisation of business rates. Local authorities now retain approximately 50% of their business rates and they will retain 100% by 2020. Mayoral areas will be able to increase their business rates in due course.

The noble Lord, Lord Shipley, talked about the concerns of the National Audit Office and the Public Accounts Committee. Within local authorities there is a Section 151 officer who, every year during the budget process, comments on the sustainability or otherwise of a council's budget. We believe that local authorities and local areas are best placed to know the dangers or otherwise of their future funding and, to my knowledge, no Section 151 officer has made an adverse statement on sustainability.

The noble Lord also asked about the £1.52 billion to complement the precept. The local authorities that are least able to raise the funding will be protected by a greater proportion of that £1.52 billion. I think that recognises, fairly, that those local authorities still have to provide social care. Local authority leaders have said to us that they need £2.9 billion. We will be providing £3.5 billion over the next few years, so I hope that gives the noble Lord some satisfaction.
The noble Lord also talked about poorer areas being likely to get poorer because of the RSG reducing to nothing by 2020. There will definitely be some form of equalisation. Councils such as Westminster raise well over £1 billion in business rates and other local authorities may see reductions. For the latter there will also be some sort of floor protection through business rate equalisation.